Reader’s Digest to File for Chapter 11 Bankruptcy Protection

UPDATE: Behind the RDA Chap. 11 Filing

The Reader’s Digest Association today said it has reached an agreement in principle with a majority of its senior secured lenders on terms of a restructuring plan to reduce the company’s debt from $2.2 billion to $550 million.

As part of the agreement, RDA expects to implement the restructuring under a voluntary pre-packaged Chapter 11 filing in U.S. bankruptcy court.

Under the restructuring agreement, RDA’s senior lenders will exchange a “substantial portion” of the company’s $1.6 billion in senior secured debt for equity and provides a transfer of ownership of the company to the lender group, the publisher said.

According to the agreement, RDA's lender group will provide the company with $150 million in debtor-in-possession financing which, it said, 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 in a statement. "Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives."

All of the members of the RDA's board of directors, except for Berner, have resigned.

The reorganization and bankruptcy protection will effect only RDA’s U.S. businesses, a spokesperson told FOLIO:. “These actions will better position us for future success,” the spokesperson said. “We will continue to operate normally through the process.”

RDA also has decided not to make a $27 million interest payment due today on its 9 percent senior subordinated notes, which are due in 2017. Instead, the company said, it will use a 30-day grace period to continue discussions with its lender group and other stakeholders.

Among RDA’s senior lenders are Bank of America, JP Morgan and GE Capital.

Check back to FOLIOmag.com for updates to this story.

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Post Comment / Discuss This Story - Info/Rules

Reader's Digest

Submitted by Anonymous on Mon, 08/17/2009 - 13:58.

Their content is still pretty good, though not what it should be in a couple of their traditionally strongest areas: fact-checking/proofreading and having engaging art on the back cover. But if they really want to launch a new era of success for themselves, they'd better take a fresh look at how they could treat their subscribers with respect. All the subscriber communications they send out just reek of deception and condescension--even more than those of most magazine publishers. What a nice thing it would be for the industry if RD led the way to a new best practice in this area.

RD in bankruptcy

Submitted by Anonymous on Mon, 08/17/2009 - 22:07.

They have been around a long time- I have read them since I was a young child. I guess I quit reading them regularly and having a subscription after I realized they are too right leaning. I have always enjoyed some of the regular sections like Laughter is the Best Medicine, Humor in Uniform and the like, but I don't want them to be conservative or liberal- just entertaining and informitive.

Disruptive Technology or Ignoring the Customer?

Submitted by Anonymous on Tue, 08/18/2009 - 03:19.

It always evokes a gut-wrenching feeling each time a magazines ceases. The first thing I want to know is, will they continue developing their web assets. The third thing is how? It seems most publishers realize that profit can still be achieved in the Digital Era, but how? PCMag is continuing their free site, Southern Accents will continue to publish online, and even Portfolio has been publishing fresh content on their website. After speaking with the guys at Maggwire, I now have a higher sense of comfort with where the future of the industry is headed. With the premium distribution platform Maggwire is developing, I expect to see mass user adoption http://www.maggwire.com/ And in the end that's what everyone needs. . .right? Acquiring mass online customers who pay, before it's too late. This is a story I will continue to watch!

Learn the facts

Submitted by Anonymous on Tue, 08/18/2009 - 15:01.

Dear Disruptive Technology, read it again. No magazine is ceasing in this case.