Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
Reader's Digest Seeks Chapter 11 Bankruptcy Protection
Author: Joel R. Glucksman
Date: February 21, 2013
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Reader’s Digest, a long-time staple in most American homes, is seeking Chapter 11 protection under bankruptcy law to unload hundreds of millions of dollars in debt.
RDA Holding, parent company of the Reader’s Digest Association, sought court protection in White Plains, New York, while it attempts to implement a restructuring plan with creditors. The proposed plan may help it shed $465 million in debt and obtain roughly $105 million in debtor-in-possession financing. The 91-year-old company is one of the highest circulation magazines in the nation. However, the publication – like many other popular magazines – has lost revenue as more consumers trend toward electronic media. RDA Holding listed $1 billion in assets and an equal amount in liabilities.
The company’s restructuring plan is supported by Wells Fargo, and will enable it to convert $465 million in senior notes to equity. If this process is finalized and carried out, RDA Holding said it will emerge from bankruptcy protection with $100 million in debt.
“After considering a wide range of alternatives, we believe this course of action will most effectively enable us to maintain our momentum in transforming the business,” said CEO Robert Guth.
RDA Holding has been forced to sell off other publications as of late due to falling subscriptions and shrinking newsstand sales. For example, it sold AllRecipes.com to an Iowa-based publication for $175 million, as well as the Weekly Reader for an unspecified amount, according to USA Today. Despite these sales, a company spokesperson said the company still has 21 leading brands in 76 countries that are continuing to thrive. After the company emerges from bankruptcy, it hopes to focus more heavily on its North American operations.
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