Reader's Digest goes bankrupt -- again

RDA Holding Corp., the parent company of Reader's Digest, has filed for Chapter 11 bankruptcy protection for the second time since 2009, the latest sign of the continuing struggles magazine publishers face in reinventing themselves for the digital age.

According to The Wall Street Journal, the Pleasantville, N.Y., company listed more than $1 billion in debts and $1.2 billion in liabilities. Under the terms of the deal, the company will convert $465 million in senior notes to equity. When RDA exits Chapter 11, its debt will be about $100 million, about 80% lower than where it stands now.

CEO Robert Guth, the third person to lead RDA since its first bankruptcy filing, argued in a press release that the current restructuring will enable the company to focus on its growing business in North America with lower costs.  Indeed, there appears to be some cause for optimism. Publishers Information Bureau data from the Association of Magazine Media shows that the company's flagship publication earned $189.7 million in advertising revenue last year, an increase of more than 12% from 2011. The company's business in Europe and its books and home entertainment business, though, have produced disappointing returns.

The publisher was taken private in 2007 by an investor group led by Ripplewood Holdings for $2.4 billion, including the assumption of debt. The company, however, continued to struggle and over the past few years has been shedding assets to cut costs. Last year, it sold Every Day with Rachael Ray and Allrecipes.com for $175 million to Meredith (MDP), the Iowa publisher of Better Homes and Gardens. Scholastic (SCHL) acquired Weekly Reader from RDA in 2012.

RDA's struggles are not unique. Time Warner (TWX), which has been under pressure from investors to shed its underperforming magazine business, reportedly is in talks with Meredith about forming a joint venture to run magazines aimed at women. News titles aimed at more general audiences, such as Time, Sports Illustrated and Fortune, would stay with Time Warner.

--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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