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Technology / AI and automation


Having suffered a body blow when the market for educational software took a dive last year, The Learning Co seems to have won itself a reprieve by reducing its debt and improving its cash flow. Formerly Softkey International Inc, the once highly acquisitive Cambridge, Massachusetts company has nonetheless had to trade a 25% stake in return for $123m from an investment group led by Thomas H Lee Co. The investor group will be issued with $150m of preferred convertible stock, which will be issued in exchange for $150m face value of the company’s exchangeable notes or convertible debt previously owned by the Tribune Co, which remains the company’s largest shareholder. The net result of this complex transaction is to improve Learning Co’s balance sheet, reducing its debt by $150m and increasing its shareholder equity by the same amount. The deal will also improve the company’s cash flow by $8.2m, through interest savings to the Tribune Co. The preferred stock is non redeemable, bears no dividend, and must be held for a minimum of 18 months. The company says last year and the first four months of this year there was a considerable downturn in the education software market, not so much in units shipped, it said, but in dollar value. A spokesman for the company suggested competitors had been price cutting, thus bringing down the value of the products. However, he said that since May this year, things had picked up considerably, and the company was confident it was seeing renewed growth in the market. Analysts were apparently pleased at the reduction of debt, providing sales start to improve. The company said both retail and education sales had picked up significantly in the second half of the year. The company seems unperturbed by the presence of Microsoft Corp in its market. The giant recently launched its second educational software product My Personal Tutor (CI No 3,229), but The Learning Co reckons Microsoft’s market share fell to 2.7% from 3.2% last month.

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CBR Staff Writer

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