Bankruptcy attorneys for Reader’s Digest filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code on Monday. From the San Francisco Chronicle:
“Reader’s Digest Association Inc., publisher of the iconic general interest magazine that began gracing American homes in 1922 and now reaches a worldwide audience of 130 million, filed for Chapter 11 bankruptcy protection Monday as it faces falling print circulation in the Internet age and looming debt payments…
The publisher expects to emerge from bankruptcy protection 45 to 90 days after the filing, which was made at the U.S. Bankruptcy Court in New York.
The company piled on debt following a $1.6 billion leveraged buyout in 2007 by investors led by Ripplewood Holdings LLC, a New York private equity firm, to take Reader’s Digest private. In such a transaction, investors typically borrow heavily to acquire a company, betting that operations would generate enough cash to cover the debt payments.
But signs of trouble have since emerged. In June, Reader’s Digest magazine cut its circulation guarantee to advertisers to 5.5 million from 8 million, and lowered its frequency to 10 issues a year from 12.
In the Chapter 11 filing, the company’s senior secured lenders have committed $150 million in new debtor-in-possession financing that can be converted into exit financing once Reader’s Digest leaves bankruptcy protection.
Reader’s Digest, based in Pleasantville, N.Y., publishes 94 magazines and sells about 40 million books, music and video products each year. Reader’s Digest magazine has 50 editions worldwide, reaching readers in 78 countries.”
