NEW YORK—Reader’s Digest Association, Inc., publisher of the magazine that claims the largest subscription base in the United States, filed for Chapter 11 bankruptcy on Monday.
Facing falling advertising revenues, Pleasantville, N.Y.-based Reader’s Digest Association (RDA) plans to reduce the company’s total debt of $2.2 billion by 75 percent. RDA has secured the support of more than 80 percent of the company’s senior secured lenders.
The company’s foreign operations, which account for more than 60 percent of its revenues, are not part of the bankruptcy deal.
RDA failed to make a $27 million interest payment due on Monday on its 9 percent bonds. A 30-day grace period will ensue where the company will negotiate with lenders to convert a portion of its debt to stock.
“We are gratified to have this support from our secured lender group,” CEO Mary Berner said in a statement. “The company has strong brands and products, a leadership position in many markets around the world and a solid plan for the future. Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives.”
Private Equity Flop
RDA was result of a leveraged buyout takeover in 2007 by Ripplewood Holdings LLC, a private equity firm based in New York. The company took on major debt as a result of the transaction.
Berner noted that advertising pages in the flagship magazine, Reader’s Digest, was down by about 6 percent through its September issues. But the company’s target segment of middle-income women and stay-at-home mothers is still favorable to potential advertisers.