Reader's Digest goes bankrupt -- again
The iconic publisher is $1 billion in debt. Can it survive 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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A Piece Of The Past,
I was raised in Pleasantville, NY where the Digest originated. I remember going to the old garage off Bedford Road where the Wallace's publication work began in the early 20s. The RD was and is an icon among American magazines. It would be a shame if they were not able to somehow resurrect the business, but the digital age has produced headwinds that the printed page can hardly compete against in the 21st century. In any event, I do wish them luck.
Peace to all ~
This is the second bankruptcy, so it seems they are struggling.
If they continue to publish, they are going to have more and more ads because they have to pay their bills. As long as the good reading material is there, what does it matter if there are ads? I still love the magazine and will continue to be a loyal customer if they are able to overcome this generation of internet surfing for our entertainment.
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