Moody's may downgrade Riverdeep

Moody's Investors Service said it placed Riverdeep Holdings plc's B2 corporate family rating, Riverdeep Group Ltd.'s B3 €300 million senior note due 2011 and Riverdeep Interactive Learning Ltd.'s B1 senior secured bank facilities under review for possible downgrade following the announcement that Riverdeep Holdings Ltd., Riverdeep's ultimate holding company, is being acquired in a share-for-share transaction by HM Rivergroup plc, in which Barry O'Callahan, Riverdeep Holding's chief executive officer and controlling shareholder, has a significant interest.

The transaction values the Riverdeep group at $1.2 billion. Concurrently, HM Rivergroup has signed a definitive agreement to acquire Houghton Mifflin Co. for $3.4 billion. The proposed transactions are expected to close by the end of the year.

The agency said the transactions will substantially increase the new HM Rivergroup/Riverdeep group's debt and its debt protection measurements will be weaker than Riverdeep's. HM intends to tender for or refinance Riverdeep's existing debt at closing.

Moody's review will focus on assessing the details of the new Riverdeep group's capital structure and leverage; the outlook for the new group's operating performance, including the potential for synergies from the combined operations; and details of the group's medium-term operational and financial strategy.

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