Iconic US publishing group Reader’s Digest has announced it will file for Chapter 11 bankruptcy protection as it desperately tries to extricate itself from a mountain of debt.
The decision to file for bankruptcy will involve a plan to get bondholders to swap $US1.7 billion worth of debt for shares in the company.
This will help cut the company’s debt load by 75%, from $US2.2 billion to $US500 million.
Reader’s Digest, still America’s most popular general interest magazine, has been struggling with falling circulation and revenue over recent years. After sacking 300 staff in January, the company announced in June that it was cutting circulation from eight million to 5.5 million, and reducing its issue frequency from 12 issues a year to 10.
The company was founded in 1922 by DeWitt and Lila Wallace and floated on the US sharemarket in 1990. Private equity firm Ripplewood lead a consortium of investors who bough the company in March 2007 for $US2.8 billion.
The Chapter 11 filing applies only to the group’s US operations.
Reader’s Digest Australia managing director Walter Beyleveldt said this morning that his business would be unaffected by the parent’s woes.
“It will remain ‘business as usual’ for the Australian company and nothing will change for our employees, vendors or business partners,” Beyleveldt said in a statement.
“In Australia, Reader’s Digest remains the second highest circulating monthly magazine in the country.”
Beyleveldt told AAP that the advertising revenue of the company, which also publishes Handyman and Healthsmart magazines, grew by 7% last financial year.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
