Cengage exits bankruptcy, focuses on e-books in Boston
Publishing giant Cengage Learning emerged from bankruptcy Tuesday, pledging to focus on electronic versions of its textbooks and teaching aides anchored by its growing Boston office.
Under a court-approved restructuring plan, Cengage eliminated $4 billion in debt and secured $1.75 billion in new financing. The company filed for Chapter 11 bankruptcy protection last summer after struggling with the major trend sweeping its industry — the move from paper to digital versions of learning tools — as well as a penchant by students to save money by renting or buying used texts.
Cengage is headquartered in Stamford, Conn., but has moved its management team to Boston and plans to employ about 500 people here by the end of the year, according to Hansen. The company is now hiring for 60 positions in Boston.
“We are developing Boston as a high-tech center for us,” Hansen said. “We’ve found the Boston market very good — not necessarily cheap — but a very good place to attract technology talent.”
Cengage publishes textbooks for students from kindergarten to college in a wide range of subjects, including a series of National Geographic science books. The company is hardly abandoning its print business, said chief executive Michael Hansen, since most students still use hard-copy textbooks.
But Cengage will devote much of its attention to developing digital study guides and other educational supplements that students will pay to use in conjunction with their books.
“The industry as a whole really hasn’t been innovative and creative enough when it comes to compelling digital alternatives,” Hansen said.
“The first generation of digital products in the marketplace are homework solutions, and they basically allow the student to submit their homework in digital form. That helps the faculty with organization, but it doesn’t really help the student.”
Cengage is conducting beta tests of digital study aides that are designed to augment classroom instruction and assigned reading.
For a college chemistry course, for instance, Cengage software connects lessons to familiar math concepts, helping students see how work in one class fits into their broader education.
It is also a way to borrow from the self-directed study model of online courses, such as those offered by Harvard University and the Massachusetts Institute of Technology through a 2-year-old program called edX.
“It allows you as a student to pace yourself through the course,” Hansen said.
“You will still need the lecture, you’ll still want to have interactions with your fellow students in study groups, but this is your self-guided tool that helps you ultimately complete the course.”
Other textbook publishers are also revising their business strategies. Boston-based Houghton Mifflin Harcourt, for instance, has focused on digital learning tools — mobile apps starring signature book characters, such as Curious George — since emerging from its own bankruptcy in 2012.
Cengage’s bankruptcy exit gives a majority stake in the restructured company to senior creditors, including Apax Partners, Searchlight Capital Partners, Kohlberg Kravis Roberts & Co., Oaktree Capital Management, Oak Hill Advisors, BlackRock Financial Management, and Franklin Mutual Advisers. Junior lenders, who were owed $1.3 billion, will share $225 million in cash or stock.