RDA Holding Co., publisher of the 91-year-old Reader's Digest magazine, filed for bankruptcy to cut $465 million in debt and focus on North American operations as consumers shift from print to electronic media, Bloomberg reports.
The company is the latest in a line of iconic businesses to have recently sought court protection from creditors, after 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 also filed for bankruptcy in August 2009, citing a drop in advertising spending and the debt load incurred in its acquisition.
The company listed assets and debt of more than $1 billion each in Chapter 11 documents filed yesterday in U.S. 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 percent reduction.
Reader's Digest chief executive officer Robert Guth, meanwhile, said: "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."
Last year, Newsweek magazine ended its 80-year print run and shifted to an all-digital format as more readers turn to free news online.
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