Reader’s Digest files for bankruptcy
- Published: 18/02/2013 at 11:54 AM
- Online news:
RDA Holding Co, publisher of the 91-year-old Reader's Digest magazine, has filed for bankruptcy to cut US$465 million in debt and focus on North American operations as consumers shift from print to electronic media.
The company's bankruptcy filing, its second in less than four years, is the latest in a line of iconic businesses that have recently sought court protection from creditors, following Hostess Brands Inc, maker of Twinkies and Wonder Bread, and Eastman Kodak Co, inventor of Kodachrome and the Instamatic camera.
Reader's Digest, founded by DeWitt and Lila Wallace, went public in 1990. An investor group led by private-equity firm Ripplewood Holdings LLC bought it in 2007 for $1.6 billion and the assumption of about $800 million in debt. The company previously filed for bankruptcy protection in August 2009, citing a drop in advertising spending and the debt load incurred in its acquisition.
The company listed both assets and debt of more than $1 billion in Chapter 11 documents filed on Monday in the United States Bankruptcy Court in White Plains, New York. Under a restructuring agreement supported by Wells Fargo & Co, $465 million of remaining senior notes will all convert to equity. The company expects to have about $100 million in debt when it exits Chapter 11, about an 80% reduction.
"We have had an ongoing process to simplify and rationalize our international business by licensing our local markets to third parties, to other publishers, to other investors and that has been a big part of our effort to streamline the company and bring in proceeds to bring down debt," Robert Guth, Reader's Digest's chief executive officer, said on Monday in an interview.
The company's flagship print magazine is read by more than 25 million people, according to its website. The company publishes 75 magazines globally including 49 editions of Reader's Digest, Taste of Home, the Family Handyman and Birds & Blooms. Reader's Digest "sold more digital editions in December than we did newsstand editions," Guth said.
The company had some success in the sale of Allrecipes.com “but frankly haven't had enough success on that front," Guth said. Last year Reader's Digest sold Allrecipes and Every Day with Rachel Ray to Meredith Corp for $175 million.
"The key message here is that we have a lot of confidence in the future of the business based upon the success of the ongoing operational transformation, but we haven't had as much success with the balance sheet side of it and we need this process to help accelerate that," Guth said.
"The much more modest debt level puts us in a position to continue to really execute these plans and push these brands forward well into the future, so it’s a very good new lease on life," he said.
Hostess, previously known as Interstate Bakeries Corp, left an earlier bankruptcy in 2009 under the control of Ripplewood and lenders. The company, based in Irving, Texas, entered bankruptcy again in January 2012 after changes in American diets curbed sales as ingredient costs and labor expenses climbed.
Kodak, based in Rochester, New York, filed for bankruptcy in January 2012, and CEO Antonio Perez has been selling businesses to shrink the company and fund its shift into commercial printing and packaging.
RDA's international operations, including Canada, are not part of the filing.
The case is In RDA Holding Co Inc, 13-22233, US Bankruptcy Court, Southern District of New York (White Plains). The previous bankruptcy case is In Re Reader's Digest Association Inc, 09-23529, US Bankruptcy Court, Southern District of New York (White Plains).
About the author
- Writer: Bloomberg News
Position: News agency