Reader's Digest to file for bankruptcy

Posted by Leah McBride Mensching on August 18, 2009 at 11:09 AM

Reader's Digest, a magazine most Americans could always find in the homes of their parents and grandparents, plans to file for Chapter 11 bankruptcy protection during the next 30 days for its operations in the United States, the Washington Post reported Tuesday. The reason for the filing stems from the $2.8 billion worth of debt Ripplewood Holdings took on when it bought shares from the Digest's old shareholders. As of 2009, Ripplewood is still $2.2 billion in debt.

The 87-year-old publication "was the original aggregator, the first blog, the pioneer of short-attention-span reading," the Post's Paul Farhi writes. It will continue to be published, but as a "wounded bird."

Ripplewood, which also publishes titles such as Every Day With Rachel Ray and the Web site Allrecipes.com, did not make an interest payment of $27 million, which was due Monday. It will talk with lenders during its 30-day grace period about a prearranged bankruptcy filing, according to The New York Times.

"Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives," Mary Berner, the company's CEO, said in a statement. The publication's executives plan to come out of bankruptcy with a debt load of $550 million.

Some lenders have agreed to help the Digest continue operating with $150 million in financing during the bankruptcy procedures.