Readers Digest files bankruptcy again

Readers Digest association Holding Co., publisher of the 91-year-old magazine, has filed for bankruptcy again in 31/2 years. It has filed for bankruptcy protection to cut $465 million in debt and focus on North American operations as consumers shift from print to electronic media. This is the second time In five years that it has filed bankruptcy.

Founded by DeWitt Wallace and Lila Wallace, Readers Digest went public in 1922. Since then it has become the best-selling consumer magazine in the United States. A private-equity firm Ripplewood Holdings LLC, led an investor group to buy it in 2007 for $1.6 billion and the assumption of about $800 million in debt. The last time that the company filed bankruptcy was in 2009, it dropped its advertisement spending and the debt load incurred in its acquisition.

Assets and debt of more than $1 billion were listed by the company in chapter 11 documents that were filed on 17^th February in U.S. Bankruptcy Court in White Plains, N.Y. 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 equity notes have agreed to $105 million in debtor-in-possession financing so that it can continue with its operations under bankruptcy.

“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 CEO, said in an interview.

Around 25 million people read the company’s flagship print, according to its website but records say Reader’s Digest sold more digital editions in December than we did newsstand editions.

“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.

Alden Global Capital and hedge fund Point Lobos Capital LLC are listed as among the company’s largest stakeholders as distressed-debt investors and the Luxor Capital Group, as administrative agent for a $10 million loan, is listed as one of its largest unsecured creditors.