Reader's Digest Petitions For Bankruptcy Protection
Senior lenders provide $150 million DIP in pre-arranged plan.
August 24, 2009
RDA Holding Co., publisher of Reader’s Digest magazine, on Monday filed for bankruptcy protection in New York’s Southern District Bankruptcy Court.
The company, which is based in Pleasantville, NY, listed assets of $10 million to $50 million and liabilities totaled more than $1 billion.
RDA’s Chapter 11 case – as of early Monday – has not been assigned to a judge. Debtor counsel on the case is Kirkland & Ellis. Miller Buckfire & Co. has been hired to serve as the magazine publisher’s financial advisory and investment banker. AlixPartners was brought on as restructuring advisor.
The bankruptcy filing is a pre-arranged petition. Ahead of the actual filing the magazine publisher announced that more than 80% of its lenders committed to its plan. RDA, on Aug. 17, reached an agreement 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. Under the agreement, RDA's senior lenders would exchange a substantial portion of the company's $1.6 billion in senior secured debt for equity, effectively transferring ownership to the lender group.
These senior lenders will provide a $150 million debtor in possession loan which is convertible into exit financing on emergence. Proceeds of the DIP will be used to finance the company’s daily operations.
RDA’s bankruptcy only involves the publisher’s US operations. So, business units in Canada, Latin America, Europe, Africa and Asia as well as Australia and New Zealand will not be part of the filing.
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