New York: The publisher of iconic magazine Reader's Digest has filed for bankruptcy to cut a $465 million debt. The magazine has been in circulation for 9 decades now and is read by over 25 million people across the world, but has lately felt the pressure of reader's switching from print to electronic media.
RDA Holding Co and more than two dozen affiliates filed for a pre-negotiated Chapter 11 bankruptcy plan, which the company says will allow it to reduce its debt load by 80 percent, according to documents filed Sunday in US Bankruptcy court in the Southern District of New York. Its international operations are not part of the filing.
It is the second time the company filed for bankruptcy protection since 2009. Despite emerging from bankruptcy as a smaller company in 2010, "its business plan and financial forecasts did not adequately account for the steep declines that the media industry has suffered over the last few years - as evidenced by Houghton Mifflin Harcourt Publishing Company's recent return to Chapter 11," Robert Guth, the company's president and chief executive officer, said in court documents.
Nor did the company's plan "adequately reflect the fragility of RDA's wide-reaching international footprint," Guth said. Under the terms of the restructuring plan, $464.4 million of its senior notes will convert to equity, leaving the company with $100 million in debt.
Wells Fargo & Co and holders of its senior secured notes have agreed to $105 million in debtor-in-possession financing to allow the company to continue operating under bankruptcy. The company plans to exit bankruptcy within four months, court documents say.
DeWitt Wallace and his wife Lila Acheson Wallace founded Reader's Digest in 1922. The magazine offered readers stripped-down versions of articles about health, home and family from other publications.
It eventually began the best-selling consumer magazine in the United States. Today it operates print and digital magazines, books, music and videos worldwide and has more than $1.1 billion in assets, according to court documents.
Distressed-debt investor Alden Global Capital and hedge fund Point Lobos Capital LLC are listed as among the company's largest stakeholders, according to the filing. Luxor Capital Group, as administrative agent for a $10 million loan, is listed as one of its largest unsecured creditors.
(With Additional Inputs From Reuters)