August 17, 2009
Reader's Digest Files for Bankruptcy
Storied media property aims to reduce debt by 75 percent.
CT news has been keeping a journalistic eye on the Reader's Digest Association for months now due to the association's growing financial problems and its close ties to Saddleback's Rick Warren, editor in chief of RDA's Purpose Driven Connection, soon to release its third print edition.
Today, RDA announced...
[It] has reached an agreement in principle with a majority of its senior secured lenders on the terms of a restructuring plan to significantly reduce its debt burden and strengthen the company financially for the future. The restructuring agreement provides that the company’s senior secured lenders will exchange a substantial portion of the company’s $1.6 billion in senior secured debt for equity and provides for a transfer of ownership of the company to the lender group.
The company has elected not to make a $27 million interest payment due today on its 9 percent Senior Subordinated Notes due 2017. Instead, the company is using the 30-day grace period available on the interest payment to continue discussions with its lender group and other stakeholders regarding the terms of final documentation and to gain additional support for the consensual de-leveraging transaction. Use of the 30-day grace period does not constitute a default that permits acceleration of the Senior Subordinated Notes or any other indebtedness. In addition, RDA continues to be in compliance with its financial covenants. The company’s business operations remain strong, with anticipated Fiscal 2009 revenue declines (not yet reported) in the low single digits, currency neutral, despite the global recession.
The press statement did not discuss details about individual media titles. But it did indicate the following:
Mary Berner, RDA’s President and Chief Executive Officer, said the company will continue to operate normally throughout the restructuring process. “This agreement in principle with our lenders follows months of intensive strategic review of our balance-sheet issues to financially strengthen the company,” she said. “We are gratified to have this support from our secured lender group. The company has strong brands and products, a leadership position in many markets around the world and a solid plan for the future. Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives.”
Without reading too much between the lines, these comments from CEO Berner suggest that Purpose Driven Connection will remain central to RDA's "transformational initiatives."