In an internal memo, the Education Media & Publishing Group–the conglomerate parent of Houghton Mifflin Harcourt Publishing–signaled that they have nearly completed a restructuring of the company’s debt.

Daily Finance has the scoop, reprinting a memo from CEO Barry O’Callaghan. The corporate leader hailed the restructuring as “terrific news for our Company.” The conglomerate also refinanced in August 2009.

Here’s more from the article: “it looks as if the restructuring plan, which would inject $650 million of fresh capital and wipe out at least $475 million in the stakes of existing private-equity holders, will be completed on or around March 9…As part of its new business plan, HMH also announced the creation of a $100 million innovation fund for future-thinking projects.”

As we noted yesterday, Education Media & Publishing Group (EMPG) –the conglomerate parent of publisher Houghton Mifflin Harcourt–is currently negotiating its second restructuring of the company’s debt.

According to Financial Times, the company aims to reduce $7 billion in debt to less than $3 billion in the restructuring. The process is intended to help EMPG avoid filing for bankruptcy, but investors will take a hit.

EMPG founder and Houghton Mifflin Harcourt CEO Barry O’Callaghan had this gloomy quote in the article: “Nobody has lost more on paper than I have. Obviously I’m disappointed for my fellow shareholders, but I can’t be blamed for things I can’t control, and unfortunately state budgets are things I can’t control … I looked very smart through September of 2008.”

The corporate research agency Moody’s has downgraded Houghton Mifflin Harcourt’s rating, citing concerns over the company’s “unsustainable capital structure” and $6.8 billion debt. The financial agency cut the company’s rating based on worries about the educational book market, according to the Independent.

Recently, Barry O’Callaghan, chairman of the company’s corporate parent Education Media Publishing Group, took over as CEO of HMH. Earlier this year, that group decided against selling the company’s trade division.

Here’s more from the article: “Moody’s maintains that HMH remains vulnerable to state and local spending in the United States on so-called basal and supplemental K-12 (twelfth grade) educational publications. It says those categories posted a 22.8 percent decline in sales in January 2009.” (Via jafurtado)

Houghton Mifflin Harcourt CEO Tony Lucki will retire from his executive post on April 15, taking a chairman spot at the company instead.

The Wall Street Journal reports that he will be replaced by Barry O’Callaghan, CEO of Education Media & Publishing Group–the Dublin-based owners of the conglomerate publisher. Earlier this year, the group decided not to sell HMH trade.

The article quoted Lucki’s memo: “Recent steps we have taken put the company in an even stronger position to deliver value to our customers and to build on our market leadership. We are on sound operational and financial footing and have great potential to grow our trusted brands and businesses.”

Reed Elsevier has signaled its intention to find a buyer for its 11.8 percent stake (valued at approximately $300 million) in Riverdeep, according to the Irish Independent. The stake forms part of Reed Elsevier’s recent deal to sell its Harcourt US schools education business to HM Riverdeep, which is headed by Barry O’Callaghan, for $4m.

It is understood that Reed agreed to take a stake in order to appease the debt backers of the HM Riverdeep deal, which will create a publishing giant with an enterprise value of about $10bn. Some $7.4bn of this will be comprised of debt. “We don’t take the view that’s a long-term shareholding,” Reed’s chief executive Sir Crispin Davis was quoted as saying yesterday, raising the spectre of the stock being sold soon after the deal is completed. Meanwhile, Sir Crispin said he was confident that HM Riverdeep had the financing in place to complete the transaction, expected to close in late 2007 or early 2008 after regulatory reviews have been completed.

The New York Times rightfully wonders just who on earth is this Barry O’Callaghan guy and why he’s not only bought up Houghton Mifflin but now Harcourt Education, thereby turning a small Irish software company into a giant American textbook publisher. Until last year, writes Eric Pfanner, Riverdeep was a relatively small software company, best known for educational programs like Reader Rabbit. If the Harcourt acquisition is completed, the company would vault past McGraw-Hill and Pearson to become the biggest textbook publisher in the United States.

So how did that happen, especially as Wolters Kluwer, Pearson and Reed have been involved in high-profile acquisitions and sales of their own? Analysts say private equity has been attracted to the educational business by steady cash flows, a relative lack of competition and expectations that spending will increase in the coming years as states like California step up textbook replacement programs – but big companies are anxious to sell because educational publishing has lagged behind areas like medical, legal and scientific publishing in the shift to digital distribution.

In comes a company like Riverdeep, where O’Callaghan sees an opportunity to bring into the future an industry long dominated by a handful of big players. “The idea of marrying content with technology holds strategic appeal,” said Drew Crum, an analyst at Stifel Nicolaus in Cleveland. But as the Sunday Business Post reports on what may prove to be the merger’s biggest stumbling block: although valued at $11 billion, the enlarged company has debts of $7.4 billion, according to analysts, and company president Jeremy Dickens admitted there would be an annual interest bill of $400 million. Hence the 11.8 percent stake in HM Riverdeep by Reed to inject some degree of stability. The question is, how far and how long?

Continuing a theme of “anything is for sale,” Reed Elsevier, mirroring moves by major Dutch and U.S. rivals, said it would sell its education arm as it focuses on faster-growing markets such as legal, medical and scientific electronic publishing. Analyst estimates suggested the sale of Harcourt Education could fetch between 1.6 billion and 2.4 billion pounds ($3.2-$4.7 billion). The Telegraph reports that Sir Crispin Davis, chief executive of business publisher Reed Elsevier, expects strong interest from private equity bidders, and indeed, one such bidder – Irish entrepreneur Barry O’Callaghan, who as CEO of Riverdeep already bought out Houghton Mifflin earlier this year – has expressed interest, according to Forbes.

Alastair Osborne sees the larger theme of companies exiting the education business in droves, and comes up with some reasons, including the No Child Left Behind Act and students’ increasing reliance on web-based materials. Such companies, Osborne says, are left with a “stark choice: invest in technology and systems that power interaction between their content and the network (such as school planning, administration and assessment) or exit the business now while valuations remain attractive.