The venerable and iconic “Reader’s Digest” magazine has announced that it will be undergoing a voluntary pre-packaged Chapter 11 filing in U.S. bankruptcy court, according to a report in Foliomag.com.
The Reader’s Digest Association (RDA) Monday disclosed that the plan that was negotiated with a majority of its senior secured lenders seeks to reduce the company’s debt from $2.2 billion to $550 million. Among RDA’s senior lenders are Bank of America, JP Morgan and GE Capital.
“Reader's Digest,” co-founded in 1922 by Lila Bell Wallace and DeWitt Wallace and based in Pleasantville, New York, will continue to be published.
The Audit Bureau of Circulation notes that the family-friendly magazine enjoys a circulation of over 8.1 million copies in the United States -- and a readership of 38 million.
Global editions of Reader's Digest reach an additional 40 million people in more than 70 countries, with 50 editions in 21 languages.
According to Monday’s announcement, RDA’s senior lenders will exchange a “substantial portion” of the company’s $1.6 billion in senior secured debt for equity. The plan also provides for a transfer of ownership of the company to the lender group.
According to the agreement, RDA's lender group will provide the company with $150 million in debtor financing, which will be convertible into exit financing upon emergence from Chapter 11.
"This agreement in principle with our lenders follows months of intensive strategic review of our balance sheet issues to financially strengthen the company," RDA CEO Mary Berner said. "Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives."
Foliomag.com further reported that the reorganization will impact only RDA’s U.S. businesses. “These actions will better position us for future success,” the spokesperson said. “We will continue to operate normally through the process.”
The magazine, a publicly traded corporation since 1990, has reportedly lost money every year since 2005.
By 2009, the scrambling book-size magazine was planning to decrease its circulation to 5.5 million and to publish 10 times a year rather than 12.
RDA also has decided not to make a $27 million interest payment due on its senior subordinated notes, which are due in 2017. RDA instead will take advantage of a 30-day grace period to continue discussions with its lender group.
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