Reader’s Digest files for Chapter 11 Bankruptcy on February 17, 2013

Reader’s Digest | RDA Holding Co., publisher of the 91-year-old Reader’s Digest magazine, filed for Chapter 11 bankruptcy on February 17, 2013. RDA is joined by at least 30 affiliates, including The Reader’s Digest Association, Inc. The cases are filed in the Southern District of New York and presumably will be jointly administered before the Honorable Robert D. Drain under Case No. 13-22233.

Robert E. Guth, is the President and Chief Executive Officer of RDA Holding and The Reader’s Digest Association, Inc.

A number of iconic companies have recently entered bankruptcy protection, including Hostess Brands Inc., maker of Twinkies and Wonder Bread, and Eastman Kodak Co., inventor of Kodachrome and the Instamatic camera.

Reader’s Digest, founded by DeWitt and Lila Wallace, went public in 1990. An investor group led by private-equity firm Ripplewood Holdings LLC bought it in 2007 for $1.6 billion and the assumption of about $800 million in debt.

Reader’s Digest 2013 Bankruptcy Background

According to Mr. Guth, these filings mark the Debtors’ second trip through chapter 11. Upon emerging from chapter 11 in early 2010, Reader’s Digest continued to be buffeted by economic downturns, domestically and internationally, and the accelerated shift from traditional print media and marketing to digital media and marketing, severely hampering the Debtors’ ability to thrive. Since the installation of the Debtors’ new management team in 2011, the Debtors have embarked on an ambitious but necessary set of initiatives to transform the Debtors’ core businesses around their iconic brands, reduce overhead and structural complexity, and sell underperforming and non-core businesses.

According to Mr. Guth, in 2012, facing a near-term liquidity crisis, the Debtors and their professionals commenced negotiations with the Debtors’ major stakeholders, including Wells Fargo Bank, N.A. and an ad hoc committee holding more than two-thirds of the Debtors’ senior secured notes. These negotiations culminated in a prenegotiated chapter 11 restructuring agreement that provides the Debtors with an approximately $105 million debtor-in-possession financing and adequate exit financing. The Restructuring Agreement also provides for the Debtors’ prompt emergence from chapter 11. Mr. Guth anticipates that the Debtors will shortly file a chapter 11 reorganization plan with the hope that confirmation of such plan will occur within four months.

By commencing these chapter 11 cases, according to Mr. Guth, the Debtors are seeking to implement the proposed Restructuring Agreement that will substantially enhance their liquidity and maximize revenue growth potential. The Debtors believe that the contemplated consensual reorganization will enable the Debtors to restructure their capital structure and global operations in accordance with the current management’s revised business plan.

RDA is a global media and direct marketing company that educates, entertains and connects consumers around the world with products and services. Taste of Home is the largest circulation food publication and is the leading multi-platform producer of information on food, cooking and entertaining. Other brands include The Family Handyman, Birds & Blooms, Country, and many other enthusiast titles in the United States and internationally. The company provides content in print; online; via digital editions on iPad, Kindle, Kindle Fire, Nook, Sony Reader, Google Nexus, and Zinio; via mobile apps; in books; and via social media outlets such as Facebook and Twitter.