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August 25, 2009

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Reader's Digest files for bankruptcy

READER'S Digest Association Inc said yesterday that it has filed for prearranged bankruptcy protection.

The privately held publisher of the popular monthly magazine and dozens of other titles said the filing only affects its United States operations.

"We look forward to emerging with a restructured balance sheet and as a financially stronger organization that is positioned to pursue growth," President and CEO Mary Berner said in a statement.

The move by the company comes after it announced earlier this month that it would file for bankruptcy protection within 30 days and got more than 80 percent of its senior secured lenders on board with the planned Chapter 11 reorganization.

Reader's Digest is looking to cut its debt from US$2.2 billion to US$550 million, giving lenders control of the company in return. The publisher has struggled with a heavy debt load since Ripplewood Holdings LLC, a New York private equity firm, led a consortium of investors in a US$1.6 billion buyout of the company in 2007.

The company's senior secured lenders have committed US$150 million in new debtor-in-possession financing that can be converted into exit financing once Reader's Digest leaves bankruptcy protection. The publisher said the financing should give it ample liquidity. Its international operations are expected to run on existing funds from its continuing operations and proceeds from the debtor-in-possession financing.

Its flagship magazine's circulation fell from more than 17 million in the 1970s to just above 8 million last year.

Reader's Digest sells about 40 million books, music and video products each year.


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