Reader’s
Digest Files Bankruptcy to Cut $465 Mln Debt
18
February, 2013
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.
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.
A
copy of Reader's Digest magazine is displayed on a rack at a grocery
store in San Anselmo, California on Aug.17, 2009. Photographer:
Justin Sullivan/Getty Images
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 today 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.
“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 today in an interview.
Digital
Editions
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
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, U.S. Bankruptcy Court,
Southern District of New York (White Plains). The previous bankruptcy
case is In Re Reader’s Digest Association Inc., 09-23529, U.S.
Bankruptcy Court, Southern District of New York (White Plains)
No comments:
Post a Comment
Note: only a member of this blog may post a comment.