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Bankruptcy over, Boston’s Houghton Mifflin looks ahead

Linda K. Zecher, Chief executive, Houghton Mifflin HarcourtJosh Reynolds FOR THE BOSTON GLOBE

Last month, Houghton Mifflin Harcourt, one of Boston's oldest and best-known publishers, filed for Chapter 11 bankruptcy as part of a deal with creditors to eliminate $3.1 billion in debt. On Friday, the company emerged from that process. Linda K. Zecher, who became the company's chief executive last September, spoke to Globe reporter D.C. Denison in her first interview since a New York judge approved the reorganization.

Was it difficult managing a procedure with the hot-button name "bankruptcy?"

Yes. We always thought of it as a restructuring, but technically it was a bankruptcy. I got a reality check when we announced it and my adult son called and said,"Mom, are you OK?" He said, "You're in bankruptcy. Isn't that a bad thing?" I explained why it's not.


How did you counter the bad associations?

We did a lot of outreach to explain the flavors of bankruptcy, and the flavor we were dealing with.

Which was . . .

A prepackaged bankruptcy, where our creditors went from owning debt to owning [shares] in the company. This company went through many acquisitions and mergers in a short period of time that left us with a lot of debt. And shortly afterwards, 2008, the market collapsed. The bankruptcy procedure enabled us to emerge debt free. We didn't cancel any leases, we didn't have a layoff, nothing changed in the way that the company operated.

Did some of the debt go back to the era when Houghton Mifflin was owned by private equity firms Bain Capital, Thomas H. Lee Partners, and others?

A lot of the debt was fixed before I got here. But I know that at one point there was $7 billion of debt. It was down to about $3.1 billion when I got here. I don't really know what the makeup of that debt was. I can only tell you that it was from a series of acquisitions and assumptions that never came to fruition.


Who owns Houghton Mifflin now?

The primary owners are the same investors we had before the reorganization: Paulson & Co., BlackRock, Avenue Capital, Anchorage Capital, Oak Hill Capital. But now they've converted their debt to equity.

So what's on your agenda, now that you're debt free?

Grow the company. We have great people, great products. We will be able to expand on some of our growth initiatives, and perhaps make some small acquisitions. We'll be able to do more in adjacent markets.

What kind of adjacent markets?

Well, for example, today we focus a lot of marketing and sales on students and teachers. But there's a huge market out there for parents. They are looking for supplemental materials, tutorials, online materials, and so on. We can now go after that market more aggressively.

How is Houghton Mifflin dealing with all the disruptive forces affecting traditional publishers: e-books, digitization, the Internet, and so on?

I look at us as an educational and lifelong learning content company, so we need to be able to roll out our content in different ways. Digital is a wave of the future. It's also a supplement to books. But going digital is not like turning a light switch on and off. There are many schools across the country, for example, that don't have broadband access. So simply putting technology in a classroom, or handing someone an iPad, is not going to necessarily make them learn.


Any Boston-related changes to Houghton Mifflin, coming out of the reorganization?

No. This is our home, and this is going to stay our home. We have a long history here. The company is almost 180 years old. I have Nathaniel Hawthorne's desk in my office. We published Henry David Thoreau and Henry Wadsworth Longfellow. So no location changes. No layoffs planned either.

You came to Houghton Mifflin from Microsoft. Was that a stark change in culture?

Very different. When you're in a technology company, everything is moving at lightning speed. You're constantly on the leading, bleeding edge. And when you come to a publisher, especially at an inflection point between technology and education, you can't just live at the bleeding edge. You have to move at a pace that your customers can absorb. You have to back off on where we're going, and talk about what we can do today. You have to think more about who your audience is.

How do prospects in educational publishing look for the next few years?

I think we're in the trough. We're at the bottom. But how long it will take to rise off that bottom — who knows? Educational publishing ties pretty closely to the real estate market, because a lot of state revenue comes from real estate.

That's not good news.

Actually, it looks like the real estate market has sort of bottomed out. So it may be starting to come back. I don't think we'll see a significant real estate upswing until, probably, 2015. But we're starting to see schools that don't have materials. Books only last so long. At some point the bindings come off. You can cobble together solutions for a certain period of time. But at some point you have to buy more materials. That's good for us.


D.C. Denison can be reached at denison@globe.com.