Reader's Digest files for bankruptcy as magazine falters

WILMINGTON - RDA Holding, publisher of the 91-year-old Reader's Digest magazine, filed for bankruptcy to cut US$465 million (S$576.6 million) in debt, Bloomberg reported on Monday.

It will focus on its North American operations as consumers shift from print to electronic media.

The company is the latest in a line of iconic businesses to have recently sought court protection from creditors, following Hostess Brands, maker of Twinkies and Wonder Bread, and Eastman Kodak, 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 bought it in 2007 for US$1.6 billion and the assumption of about US$800 million in debt. The company also filed for bankruptcy in August 2009, citing a drop in advertising spending and the debt load incurred in its acquisition, Bloomberg reported.

The company listed assets and debt of more than US$1 billion each in Chapter 11 documents filed on Sunday in US Bankruptcy Court in White Plains, New York.

Under a restructuring agreement supported by Wells Fargo & Co., US$465 million of remaining senior notes will all convert to equity. The company expects to have about US$100 million in debt when it exits Chapter 11, about an 80 per cent reduction, according to Bloomberg.

"We have had an ongoing process to simplify and rationalise 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," Mr Robert Guth, Reader's Digest's chief executive officer, told Bloomberg on Sunday 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," Mr Guth said.

The company said it reached a pre-petition accord with its secured lender and more than 70 per cent of its secured note holders.

The bankruptcy was filed to implement the pre-arranged restructuring.

"The Chapter 11 process, which will facilitate a significant debt reduction, will enable us to continue to redefine our business by focusing our resources on our strong North American publishing brands, which have shown a new vitality as a result of our transformation efforts, particularly in the digital arena," Mr Guth said in a company statement.

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