Feb 3 (Reuters) - Cengage Learning Inc said on Monday it reached an agreement with its major creditors that will cut the textbook publisher's debt by $4 billion and pave the way to exit its Chapter 11 bankruptcy.
The company said the agreement will modify a previously filed plan of reorganization and gives it the support needed to confirm its plan in March.
Prior to the agreement, the company had $5.8 billion of outstanding debt, much of it accumulated as a result of a leveraged buyout led by Apax Partners in 2007. The private equity fund acquired Cengage, which develops teaching materials for schools and libraries, for $7.75 billion from Thomson Reuters Corp, the parent of Reuters.
Cengage's loans rose in value last month in anticipation of a modified plan of reorganization that would provide a better recovery to creditors, according to a report by Reuters Loan Pricing Corp.
Under Monday's agreement, Cengage will secure exit financing of up to $2 billion to fund its plan of reorganization and to provide a revolving credit facility, according to a statement from Cengage.
First-lien lenders will receive a substantial majority of the equity in the company when it exits bankruptcy.
Second-lien lenders and unsecured creditors will receive a share of $225 million in cash or stock.
Cengage's unsecured creditors have been battling with the company's secured lenders over the terms of the restructuring, and Monday's agreement will stay ongoing litigation. The deal was reached through mediation overseen by Robert Drain, a judge on the U.S. Bankruptcy Court in Manhattan.
Cengage said the agreement will be filed soon and is subject to approval by the U.S. Bankruptcy Court in Brooklyn, New York.
Cengage filed for bankruptcy in July 2013.
The case is In re: Cengage Learning Inc, U.S. Bankruptcy Court, Eastern District of New York, No. 13-44106.