Publisher of Reader’s Digest, the monthly magazine founded in 1922 as a collection of small articles said Monday, it will file for Chapter 11 protection with plans to trade a portion of its debt for ownership of the company. Reader’s Digest Association Inc., owned by the New York private equity firm Ripplewood Holdings since ’07, said Monday it has reached an agreement to get rid of a part of the $1.6 billion they hold in senior secured notes. Of course lenders will get ownership in return.
In June, Reader’s Digest announced publicaly it would cut the circulation agreement it makes to advertisers to 5.5 million, from 8 million and lower its rate to 10 issues instead of 12. No worries, the company said the majority of suppliers will be paid back in full under the bankruptcy plan. The company also said it will seek further agreements from lenders and other stakeholders before making a complete formal bankruptcy filing within a month.