Reader's Digest to file for bankruptcy protection
17 Aug 2009
Reader's Digest Association, which publishes the Reader's Digest magazine, is planning to file for pre-arranged bankruptcy protection after it reached agreement on a debt-for-equity restructuring with a majority of its secured lenders.
The investor group led by Ripplewood Holdings that acquired the media group along with its $2.4 billion debt in 2007, (See: Investor group to acquire Reader's Digest for $1.6 billion) said that the company's lenders would exchange a substantial portion of the company's $1.6 billion debt for equity.
The Chapter 11 bankruptcy filing will apply only to the company's businesses in the US.
Mary Berner, RDA's president and chief executive officer, said the company would continue to operate normally throughout the restructuring process. "This agreement in principle with our lenders follows months of intensive strategic review of our balance-sheet issues to financially strengthen the company."
Some members of the senior lender group will provide $150 million in debtor-in-possession financing, which would help fund its operatations during the Chapter 11 process.
The Pleasantville, New York-based media company, which has been losing money since 2005, had hired Berner, the previous chief executive of Fairchild Publishing, to turn the company around in 2007.
