Bankruptcy Filed by Reader’s Digest

August 25, 2009 · Posted by Alex

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.”

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Consumer Bankruptcy Filings Rising in Southern California

June 29, 2009 · Posted by Alex

From Curtis Law Group’s blog:

“As reported in the Los Angeles Times yesterday, southern California has seen a dramatic increase in the number of consumer bankruptcy filings of late. The article referenced the mortgage crisis as the culprit, while also highlighting the fact that changes to the Bankruptcy Code in the Bankruptcy Bill of 2005 have seemingly failed to reduce the number of bankruptcies these last few years.

Although the article emphasizes the increase in the greater Los Angeles area, bankruptcies in Orange County, Riverside County, and San Bernardino County have also risen dramatically in the past year, flooding bankruptcy attorneys in southern California with inquiries from debtors about whether they qualify for Chapter 7 bankruptcy, or whether they must resort to Chapter 13 of the Bankruptcy Code for relief.”

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Bankruptcy Bill Update: Congress to Vote

March 5, 2009 · Posted by admin

Congress is scheduled to vote today on altering the Bankruptcy code to allow judges to modify mortgages.  This vote about a potential change in bankruptcy law has Orange County bankruptcy attorneys and their bankruptcy clients watching attentively.  From the McClatchy Tribune Wire Service:

“The U.S. House is expected to vote today on a proposal that would allow judges to modify mortgages of people who file for bankruptcy — and could bring a new wave of filings, local court officials say.

The proposed “cramdown” legislation has been controversial — lenders, for one, have opposed it. But bankruptcy attorneys and credit counselors say it could be a smart solution, helping struggling homeowners and making sure lenders get at least a portion of their money back.

It’s part of a broader $75 billion housing plan, which President Obama’s team outlined Wednesday. The plan features cash incentives for mortgage holders who cut deals with borrowers for new, more affordable terms.

The bankruptcy provision is expected to go to the Senate soon after the House vote, and rules there will make passage more difficult.

Under current laws, bankruptcy judges lack the authority to modify most mortgages. They can approve modifications for credit-card debt and other loans, including second-home mortgages. In Chapter 12 cases, usually filed to save family farms, mortgages can be adjusted to reflect the current value of a debtor’s home and farm, rather than the original loan amount.

The bill would allow bankruptcy judges to alter the terms of a mortgage, a process known to the industry as ‘cramdown,’ if no other options remain for homeowners. Judges could extend the payment period or lower the value of the mortgage on the home to the existing market value.”

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Circuit City’s Bankruptcy to End in Liquidation

January 19, 2009 · Posted by Alex

After filing for bankruptcy in November, Circuit City will now have to shut down completely and liquidate its’ stores and assets after failing to find a buyer. Only a week ago, according to the New York Times report, there were two potential buyers in talks with Circuit City, but it was not able to reach an agreement with its creditors and lenders in time.

From the New York Times online:

“The demise of Circuit City, while not surprising given its declining sales, is part of a radical shift taking place in American retailing. Weak chains — unable to weather the freeze-up in consumer spending, and choked by tight credit markets — are shuttering their doors.

Last year, a raft of retailers including Boscov’s, Sharper Image, Mervyns, Linens ’n Things, Whitehall Jewelers and Steve & Barry’s filed for bankruptcy protection. This week alone, Goody’s Family Clothing and Gottschalks Inc. also filed. Many more retailers are expected to follow suit as they run out of working capital or are unable to finance their debt. But emerging from bankruptcy is harder than ever because of changes in the bankruptcy code and vise-like credit markets.

Indeed, Wall Street analysts said in November that the prospects of long-term survival for the Circuit City were bleak. Months of declining sales during the recession sent the company over the edge, although its problems go back a decade, from buying cheap real estate leases in inferior locations to laying off its most experienced sales staff. The latter saved money but cost the company employee morale and countless customers.

When the retailer filed for Chapter 11 bankruptcy in November, its shares had lost more than 90 percent of their value since the beginning of 2008.

The company is still awaiting final approval of the liquidation from federal bankruptcy court.”

As Circuit City stores will now be shut down, Orange County residents should make those last few trips to their nearby store. Circuit City locations in Orange County can be found in the following cities: Foothill Ranch, Fullerton, Huntington Beach, Irvine, Laguna Hills, Newport Beach, Orange, Rancho Santa Margarita, and Santa Ana.

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California Cities Included in Bankruptcy Prediction For 2009

December 29, 2008 · Posted by Dr. Grey

Four cities in California and six other cities nationwide will be seeking for bankruptcy lawyers soon, according to a prediction by John Moorlach.

Moorlach, the accountant who predicted Orange County’s bankruptcy in 1994, said as many as 10 cities will look for court protection from creditors next year under Chapter 9 of the bankruptcy code, as public finances get worse.

Although he estimated these numbers based on general economic conditions, Moorlach, now chairman of the Orange County Board of Supervisors, didn’t mention the California cities that may file for bankruptcy. Will Irvine be one of those municipalities? Is Santa Ana next? Let’s hope that this time around, Orange County cities escape the pain of bankruptcy, so that we can all have a happy new year!

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