Citigroup Inc. : Houghton Mifflin files Chapter 11 bankruptcy

(Reuters) - Houghton Mifflin Harcourt Publishers Inc filed for bankruptcy protection on Monday after the textbook publisher reached agreement with a majority of its creditors to cut about $3.1 billion of debt.

The Boston-based company and two dozen affiliates filed for Chapter 11 protection in U.S. bankruptcy court in Manhattan. It said it had more than $1 billion in both assets and liabilities.

Houghton Mifflin has struggled as state and local governments cut spending, reducing demand for textbooks for students from kindergarten to 12th grade, Moody's Investors Service has said.

On May 11, Houghton Mifflin said its agreement with more than 70 percent of its senior secured lenders and bondholders would permit a "pre-packaged" bankruptcy.

It said it expected to be able to emerge from Chapter 11 by the end of June.

The restructuring calls for Houghton Mifflin to convert its bank and bond debt into 100 percent of the equity of a reorganized company, saving $250 million in annual cash interest costs, according to the company. Trade creditors and unsecured creditors would be paid in full.

Houghton Mifflin has lined up $500 million in financing from Citigroup Inc.

The case is In re: Houghton Mifflin Harcourt Publishing Co, U.S. Bankruptcy Court, Southern District of New York, No. 12-12171.

(Reporting By Jonathan Stempel in New York; editing by Gerald E. McCormick and Jeffrey Benkoe)