Reader's Digest to file for bankruptcy
Media company plans to seek Chapter 11 protection. Bankruptcy financing of $150 million already committed.
NEW YORK (Reuters) -- Reader's Digest Association Inc., publisher of the widely read Reader's Digest magazine, said Monday it would likely file for Chapter 11 bankruptcy for its U.S. businesses to cut its debt load.
The media company, known worldwide for its family-friendly namesake magazine, been trying to slash costs and boost growth since it was taken private in 2007 by an investor group led by Ripplewood Holdings LLC.
The bankruptcy would take the form of a so-called pre-arranged filing, Reader's Digest said in a statement. A pre-arranged filing comes after a company has already reached deals with its lenders to cut its debt.
The Chapter 11 filing will apply only to the company's U.S. businesses. Its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be affected.
"Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives," said President and Chief Executive Officer Mary Berner, in a statement.
Reader's Digest calls itself the the world's largest paid-circulation magazine.
The Pleasantville, N.Y., media company said the bankruptcy would help facilitate an agreement with lenders to exchange a portion of its $1.6 billion in senior secured debt for equity, and transfer company ownership to the lender group.
The agreement, which is subject to court approval, also includes a commitment from some members of the senior lender group to provide $150 million in debtor-in-possession financing, which would help fund operations during the reorganization. The pre-arranged plan proposes to cut debt by 75% to $550 million from the current $2.2 billion.
The company has offices in 44 countries, marketing books, magazines, educational products, recorded music collections and home video products. It also publishes food magazine Every Day with Rachael Ray.