Citing LBO Wire, DealBook notes that actions by Thomas H. Lee Partners, Blackstone and Bain Capital with respect to Houghton Mifflin Co., might "[presage] an exit from the company." In particular, the issuance of $300 million in "payment in kind" (PIK) notes, which pay interest in more notes rather than cash, and have a floating rate that rises from 675 basis points to 775 basis points over 3 years. This follows a $150 million dollar issuance of senior notes by the company back in 2003 used to pay, imagine this, a special dividend to the private equity sponsors.
The firms paid $1.66 billion for Houghton (really $1.28 billion and the assumption of $380 million in debt) in January 2003, $615 million of which was paid in equity. Interestingly, Vivendi, the seller back in 2003, paid $2.20 billion for the firm in June 2001 (around the same time as they bought MP3.com).
The debt to equity ratio on the deal was around 1.7:1, which seems pretty low to me. IRRs probably aren't going to be huge but I'm certain the special dividends help, since they have almost 75% of their original equity money back. So far their realized IRR is around -11.50%, not bad considering they haven't really had a major liquidity event yet.
