Reader's Digest files prearranged Ch. 11 papers

[August 24, 2009]  PLEASANTVILLE, N.Y. (AP) -- Reader's Digest Association Inc. said Monday that it has filed for prearranged Chapter 11 bankruptcy protection as part of its restructuring plan.

The privately held publisher of the popular monthly magazine and dozens of other titles said the filing only affects its U.S. operations.

"We look forward to emerging with a restructured balance sheet and as a financially stronger organization that is positioned to pursue growth and transformational initiatives," President and CEO Mary Berner said in a statement.

The move by the Pleasantville-based company comes after it announced earlier this month that it would file for bankruptcy protection within 30 days and got more than 80 percent of its senior secured lenders on board with the planned Chapter 11 reorganization.

Reader's Digest is looking to cut its debt from $2.2 billion to $550 million, giving lenders control of the company in return. The publisher has struggled with a heavy debt load since Ripplewood Holdings LLC, a New York private equity firm, led a consortium of investors in a $1.6 billion buyout of the company in 2007.

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. The publisher said the financing should give it ample liquidity for its restructuring and the future. Its international operations are expected to run on existing funds from its continuing operations and proceeds from the debtor-in-possession financing.

The publisher's flagship magazine has seen its circulation drop from a peak of more than 17 million in the 1970s to just above 8 million last year.

Reader's Digest publishes 94 magazines and sells about 40 million books, music and video products each year.

[Associated Press]

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