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."
Posted by Tim Morgan on August 17, 2009 11:30AM
Comments
I've just posted a letter to RD (Australia) asking them to cancel my subscription this morning. One of the reasons was the increasing amount of adverts and associated "sly sell" by way of stealth adverts within it's covers. However my major concern was an advert for a sexual stimulus apparatus. Though I had written to voice my objection to this type of advertising, more at home in a steamy erotica shop, the adverts continued. I wrote that for what I thought was a basically family orientated publication, these adverts were not acceptable. RD's financial woes may have come from their compromise, for today's RD is not the publication of ten years ago.
Posted by: johnboy at August 19, 2009
I've not read a Reader's Digest in years but I used to enjoy them. However, the internet I feel would be more the reason for such publications demise and the eco-friendly push away from paper. I'm sure Rick Warren's close involvement with RD and his new publication had a lot to do with the demise as well. Sort of out with the old and in with the new with the new being something that will only appeal to a very targeted group of Christian readers. May the reader's Digest Rest in Peace.
Posted by: Sue Dent at August 19, 2009
We'll see if they make it through the reorganization and come out the other side. This seems to be the big challenge for all pubs these days (so, how is Christianity Today doing?) with diminishing advertising, fragmented readers, and ease of access to free info through internet. I doubt that Rick Warren had anything to do with it, as Sue Dent posts above. That appeared to be a growth strategy sidebar. As I understand it, Readers Digest simply lost their way from their true voice. Doesn't that happen to many of us in times of chaos and confusion?
Posted by: Bradley J. Moore at August 21, 2009
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