Publisher Houghton Mifflin Harcourt filed for Chapter 11 bankruptcy protection Monday to restructure $3.1 billion in debt and reduce annual interest costs by around $250 million.

Under a May 11 agreement with m
ore than 70 percent of its lenders, Boston-based Houghton Mifflin will convert outstanding long-term debt into equity in the reorganized company. Existing shareholders would receive warrants for 5 percent of new stock if they vote for the plan, and Citigroup Inc. (NYSE: C) will provide $500 million in financing.

The company, whose books include the "Lord of the Rings" series and "Curious George," had assets and debt exceeding $1 billion, according to documents filed in U.S. Bankruptcy Court in New York on Monday. It said the restructuring would not affect its day-to-day business and employee salaries.

"We are excited to have reached an agreement with our lenders and bondholders on a financial restructuring plan that will equitize our current long-term debt and put HMH in a financially stronger position for the future," said Linda Zecher, president and CEO of Houghton Mifflin Harcourt in a May 11 statement. "We will be well-positioned to accelerate our growth initiatives and expand our digital platform."The company, whose books include the "Lord of the Rings" series and "Curious George," had assets and debt exceeding $1 billion, according to documents filed in U.S. Bankruptcy Court in New York on Monday. It said the restructuring would not affect its day-to-day business and employee salaries.

"We are excited to have reached an agreement with our lenders and bondholders on a financial restructuring plan that will equitize our current long-term debt and put HMH in a financially stronger position for the future," said Linda Zecher, president and CEO of Houghton Mifflin Harcourt in a May 11 statement. "We will be well-positioned to accelerate our growth initiatives and expand our digital platform."

Houghton Mifflin, founded in 1832, and was the publisher of Mark Twain, also has education divisions including textbooks and game titles "Where in the World Is Carmen Sandiego" and "The Oregon Trail." It agreed in January to distribute e-books published by Amazon.com Inc. (Nasdaq: AMZN). The company is controlled by private equity investors including John Paulson.

The company's restructuring comes as the book industry is in turmoil from declining print sales and consumers moving to digital. Borders Group Inc., the second-largest bookstore chain, filed for bankruptcy protection in February 2011 and liquidated its 399 U.S. stores in July after it failed to find a buyer.

Houghton Mifflin has hired law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP and the Blackstone Group LP (NYSE: BX) as financial adviser. It expects to complete the restructuring by the end of June.

Contributed by International Business Times