Harcourt Plans Cost-Cutting to Help Pay Debt : Tells of SEC Probe, Sea World Price Hike

WASHINGTON — Harcourt Brace Jovanovich Inc. Tuesday announced broad cost-saving measures designed to help pay off debt from its successful defense against an unwanted takeover bid by British publisher Robert Maxwell.

At the same time, the publishing giant also said that the Securities and Exchange Commission is studying the firm’s repurchases of its securities last May and its recommendations that holders of its debt securities convert them into common stock by June 8 in order to receive a special dividend under a recapitalization plan.

The company also said it would take other measures to improve profitability, including, in its amusement parks segment, a likely increase in prices at its San Diego and Orlando Sea World parks, as well as a push for more lucrative deals with its food and merchandise suppliers.

Harcourt Brace opted for a costly recapitalization plan on May 26 as a defense against the bid by Maxwell. The plan offered common stockholders a special $40 cash dividend and a share of preferred stock for each of their common shares. The plan would add nearly $3 billion to the debt load of the Orlando, Fla.-based company.

After the plan was announced, the company spent about $260 million to repurchase an unspecified amount of its common stock and debt securities.

Supplied Information

In papers filed with the SEC in connection with its recapitalization plan, Harcourt Brace revealed that it was told of the “informal inquiry” in July, and has supplied information requested by the SEC.

The diversified textbook and entertainment company said it told the SEC that it believes its repurchases and recommendations to debt securities holders “were in compliance with applicable federal securities laws.”

The company’s filing did not elaborate on the current status of the inquiry. Spokesmen and attorneys for the company could not be reached for comment.

In its filing with the SEC, the firm said that, if the cost-cutting was inadequate, it might have to sell assets or even, as a last resort, seek bankruptcy court protection from creditors.

The cost-cutting measures include a 5 to 10%t staff reduction over the next year and postponement of wage and salary increases when possible.

Harcourt also said it would consolidate some publishing businesses, postpone revisions of some textbook series and reduce research and development activities.