The Dubai royal family is poised to become a major shareholder in Barry O'Callaghan's Education Media & Publishing Group (EMPG) as part of a major restructuring that will see holders of $1.2bn (€843m) of unsecured debt take a 45pc stake in the business.
The Cork-born entrepreneur's 38pc stake in the publisher is set to be diluted to 20.8pc by the highly-complicated deal, which cuts the group's debt from $7.3bn to $6.1bn.
It is understood that Istithmar World Capital, an unsecured debt-holder, is the investment vehicle through which Dubai's ruling family will take its stake in EMPG. Mr O'Callaghan has had links with the private equity house since last autumn, when they set up a joint venture, EMPG International, to bring the education publishing group's products to developing markets.
Other unsecured debt-holders that are set to become key shareholders include: private equity firm Apollo Management, which is also one of its influential senior creditors, Merrill Lynch; hedge funds Cyrus Capital and Avenue Capital; and Bluebay Asset Management.
Mr O'Callaghan formed EMPG through the $5bn merger of his Riverdeep e-learning company in 2006 with US school textbook group Houghton Mifflin (HM), and their subsequent $4bn acquisition of Harcourt Education in America from Reed Elsevier.
The proposed financial restructuring deal will see the unsecured debt-holders convert their exposure into equity at $5.5 per share, almost half the $10 level at which the group raised equity to fund both the HM and Harcourt deals. It gives the group an equity value of $2.66bn and values Mr O'Callaghan's holding at almost $555m.
The dealmaker has been in negotiations with EMPG's lenders over the past number of months as he sought to ease the group's credit terms and change its heavily-indebted capital structure.
In March, he managed to get lenders behind the publishing group's $4.3m senior debt, including Apollo, Guggenheim Partners and BlackRock, to relax their covenants. Mr O'Callaghan is now on the cusp of finalising a more sweeping restructuring of its debt.
The senior -- or first lien -- debt holders are being asked to lower the coupon, or interest rate, they are due from 6.75 percentage points above the inter-market rate to 5.25pc. In return, they would get a higher portion of their annual payment in cash, and a lower portion of interest roll-up