Reader’s Digest to file for bankruptcy

Reader's Digest, the well-known magazine publisher, has said it will file for Chapter 11 bankruptcy in order to deal with its mounting debt problems. The company, bought in 2007 and taken private by a group of investors including Ripplewood Holdings, has been hit by the weak advertising market, which has prevented it from cutting its massive debts. These currently stand at $2.2bn and the company plans to reduce this to $550m while in administration.

The bankruptcy will only affect the company's US operation, however it will continue publishing its US edition while it negotiates the deal with a bankruptcy court. Chief executive Mary Berner put a gloss on the bankruptcy, saying "Our deal has already been negotiated and hammered out with a majority of our creditors. It doesn't affect our employees, it doesn't affect the vast majority of vendors, it doesn't mean we'll do mass layoffs, it doesn't mean we're going to be selling off assets. It's business as usual." Reader's Digest is the biggest magazine in circulation globally, selling 10m copies a month, and has a history dating from the 1920s. However its popularity has faded in recent years in the face of competition from the internet and its parent company is now mainly reliant on book sales for its business.The company hopes to carry out a debt-for-equity swap with investors in an effort to reduce its annual interest payments from $145m to less than $80m.WHAT THEY ARE SAYING:

Lauren Streib in Forbes

"The restructuring will allow the company to continue its much-needed revamp, but since Berner took the helm two years ago, the growth strategy hasn’t panned out as well as planned. Cutting costs, streamlining staff and restructuring finances might help through the advertising fallout. But the lingering question remains: how to force youth on an aging brand?"

Former magazine publisher, Tony Quinn, in the Guardian

"I don't see it having much of a future because it's of its age. I don't see it pulling in new readers." ·