Reader’s Digest to file for bankruptcy protection

August 17, 2009
Readers Digest to file for bankruptcy protection

Readers Digest Association, owner of the worlds biggest-selling magazine, has announced plans to file for Chapter 11 bankruptcy protection.

The company, which was taken private in 2007 after a turbulent 17-year run as a public company, said that it had reached an agreement in principle with a majority of its senior secured lenders on a restructuring plan. This will allow it to reduce its debt burden significantly and will effectively transfer ownership to its lenders.

Readers Digest magazine, an American household favourite since the 1920s, has a circulation of more than ten million a month in the United States, but its popularity has been on the wane for decades as its ageing readership dies off and younger generations fail to replenish its subscriber base. The parent companys main business is now driven by book sales.

Under the restructuring deal, the company will convert a substantial portion of its $1.6 billion (980 million) in senior secured debt into equity. It said that it had elected not to make a $27 million interest payment due on Monday on its notes, and it added that it would use a 30-day grace period to continue talks with lenders about the bankruptcy filing, which it said had been prearranged with most of the banks concerned already in agreement.

In the meantime, RDA said that it was business as usual, adding that the Chapter 11 filing will apply only to its American businesses. The companys operations in Europe, Canada, Latin America, Africa, Asia and Australasia are expected to have adequate funding, based on continuing operations and access to the proceeds from the refinancing.

A spokesman said that British operations would not be affected, adding that this is going to be a very benign version of Chapter 11.

The agreement in principle, which is subject to court approval, includes a commitment from certain senior lenders to provide $150 million in new money debtor-in-possession financing. The company expects to emerge from bankruptcy with $550 million in debt left on its balance sheet, a 75 per cent reduction from present levels of $2.2 billion.

Mary Berner, RDAs president and chief executive, said that the deal had followed months of intensive reviews.

Famed for publishing condensed novels and edited articles from other magazines, Readers Digest has been struggling for years to win over readers in the digital age by building up 40 niche magazine titles, with combined global sales of 34 million and a readership in excess of 100 million.

The company traces its roots to its founders DeWitt and Lila Wallace, who started the company in 1922 with the digest-sized magazine that is now available in 80 countries. It went public in 1990, but had a bumpy ride when dissident stockholders forced it to scrap its two-tier stock system.

In March 2007, Ripplewood, a New York-based investment firm, led a consortium of investors to buy the company for $2.8 billion, much of that in the form of debt. Ms Berner, a former chief executive of Fairchild Publishing, was appointed to help to revive its fortunes.

RD has been sending e-mail and letter out randomly to inform people that they could win certain amount of prizes and gifts, then will ask people to subscribe to their other magazines or books. Wonder anyone really reply them and subscribe the mags?
For me, usually I bought the RD mag from pasar malam at RM4 per copy (usually 1-2 mths earlier copy) instead of the latest copy at RM15. RD bosses must be hating me for buying the cheaper one… :mrgreen:

Now I wanna support Reader’s Digest by buying the original ones at original price, even though it can cost me a burget set… hmmm

Support them man, Reader’s Digest is a really good magazine…

[quote=“HandsomeGuy”]RD has been sending e-mail and letter out randomly to inform people that they could win certain amount of prizes and gifts, then will ask people to subscribe to their other magazines or books. Wonder anyone really reply them and subscribe the mags?
For me, usually I bought the RD mag from pasar malam at RM4 per copy (usually 1-2 mths earlier copy) instead of the latest copy at RM15. RD bosses must be hating me for buying the cheaper one… :mrgreen:[/quote]

true…like scam or something

the more u buy from them higher chance to win prizes