Riverdeep shareholders Pat McDonagh and Barry O'Callaghan will each draw a $55 million (€45.5 million) payout from a new loan finalised by the company yesterday.

Riverdeep has arranged a $175 million pay-in-kind loan that will be used to return cash to all of the educational firm's shareholders.

It is believed that Mr McDonagh and Mr O'Callaghan, who each own just less than a third of the company, will use the windfall to pay down their personal borrowings.

Both spent $36 million in March in another Riverdeep refinancing that allowed them to buy out two venture capital companies: Alchemy and MSD.

The mechanism under which some 1,000 other shareholders will receive their cash will be settled next month.

The loan was yesterday priced to carry a coupon of six-month dollar Libor - a rate banks charge each other for loans - plus 9.87 per cent. This entails an interest rate of about 13 per cent. Riverdeep Acquisitions, the entity that arranged the loan, has also undertaken to pay warrants equivalent to 2.25 per cent of shares in Riverdeep Holdings to its lenders.

The loan, which has a six-year term, is larger than the $150 million structure Riverdeep had initially planned.

The company's vice-president of strategic relations, Tony Mulderry, said yesterday that the loan had attracted a "fairly heavy oversubscription".

This demand allowed the firm to price the loan at the lower end of a range it offered as guidance before the launch. Investors came from the US and European markets and included an Irish participant.

Pay-in-kind loans are reasonably rare products structured to pay interest in the form of new debt.

Two ratings agencies said last week they might reduce their ratings on Riverdeep because of the loan.