In a release about the filing, the Reader’s Digest publisher said that 80 percent of its senior secured lenders had already agreed to the restructuring plan that was part of the filing. The Chapter 11 filing will only affect the company’s U.S. operations, the company added.
“Our business operations remain solid, with anticipated Fiscal 2009 revenue only down by low single digits, currency neutral, despite the recession,” said Mary Berner, the company’s president and CEO, in a statement. “We look forward to emerging with a restructured balance sheet and as a financially stronger organization that is positioned to pursue our growth and transformational initiatives.”
Under the terms of the bankruptcy plan negotiated prior to RDA’s filing, senior lenders led by J.P. Morgan Chase & Co. will swap a part of their $1.6 billion in debt for a large equity stake — about 92.5 percent — in the new company once it emerges from bankruptcy protection, The Wall Street Journal reported. The company’s board and senior management would get the remaining stake, about 7.5 percent.
As we previously reported, the plan will reduce RDA’s $2.2 billion debt to a much more manageable $550 million.
Last week, after RDA announced its plans to file for Chapter 11 in order to avoid making a $27 million interest payment on senior subordinated debt due on August 27, Folio reported that Berner and the company’s CFO Tom Williams had
agreed to accept lower renegotiated better salaries and severance packages during the company’s bankruptcy filing.
The New York Post also reported this weekend that J.P. Morgan is now the nation’s number one publisher, thanks to investment holdings in Reader’s Digest, Source Interlink Media and American Media Inc., which now have over $5 billion in combined revenue.
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