Reader's Digest Faces Bankruptcy: Assets Sold, No Layoffs Planned
The 72-year-old pocket-sized Reader's Digest magazine, is on unsteady financial ground after filing for Chapter 11 bankruptcy for its U.S. businesses as part of a prearranged plan with lenders to cut debt by 75 %..
The parent company had been hoping to emerge with a restructured business over the coming weeks without affecting its overseas companies, but it failed.The American corporation now expects to emerge from bankruptcy “within the next few weeks.”
Reader's Digest Bankruptcy Plan
Reader's Digest Association Inc, has been trying to cut costs since it was bought in 2007 by an investor group led by Ripplewood Holdings LLC.
The deal, if approved by a bankruptcy court, would allow Reader's Digest to slash its debt load to $550 million, from the current $2.2 billion.The arrangement would also allow the company to reduce its annual interest payments on remaining debt to less than $80 million from about $145 million, said President and Chief Executive Officer Mary Berner in an interview.
Our deal has already been negotiated and hammered out with a majority of our creditors," said Berner. The arrangement "doesn't affect our employees, it doesn't affect the vast majority of vendors, it doesn't mean we'll do mass layoffs, it doesn't mean we're going to be selling off assets. It's business as usual."
The Chapter 11 filing will apply only to the company's U.S. businesses. Operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be affected. Ripplewood will have no ownership stake going forward either in the United States or internationally.
Reader's Digest, based in Pleasantville, New York, has said it is the largest selling magazine in the world. It has offices in 45 countries and sells books, magazines, recorded music collections and home videos. Among other offerings, it also publishes food magazine Every Day with Rachael Ray.