The publisher of Reader’s Digest, the most popular US general interest magazine, has said that it will file for bankruptcy protection with a plan to swap 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 2007, said that it has reached an agreement in principle with a majority of secured lenders to erase a portion of the USD 1.6 billion they hold in senior secured notes.
The lenders will get ownership in return.
The planned filing, which does not include operations outside the United States, comes amid declining circulation, an industrywide advertising slump and large debts.
Reader’s Digest, the monthly magazine founded in 1922 as a collection of condensed articles from other publications, has been searching for a niche as the Internet upends the magazine industry’s traditional business models.
This year’s ad declines saw the closing of several high-profile titles including Conde Nast’s Portfolio, Domino and Blender.
In June, Reader’s Digest announced it would cut the circulation guarantee it makes to advertisers to 5.5 million, from 8 million and lower its frequency to 10 issues a year from 12.
In the second half of last year, the US edition of Reader’s Digest had circulation of 8.2 million, 2 per cent above the guarantee to advertisers but 12 per cent below circulation a year earlier.