The Reader’s Digest Association Inc. officially filed for Chapter 11 protection on Aug. 24. In papers filed with the U.S. Bankruptcy Court for the Southern District of New York, the company listed assets of $2.2 billion and liabilities of $3.4 billion.
When the company emerges from bankruptcy protection, it will still carry roughly $550 million in debt on its books. It will also have $150 million in new money debtor-in-possession financing. As part of its filing, the company claimed that more than 80% of its lender group supports its reorganization plan.
The Chapter 11 filing will apply only to the company's U.S. businesses -- its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be affected, according to the company.
Under the terms of the reorganization, the company will exchange ownership of the company with its debt holders for a $1.6 billion reduction of its $2.2 billion in debt. According to published reports, the company’s largest debt holders include J.P. Morgan Chase, GE Capital, Aries Management, DK Partners, Regiment Capital and Merrill Lynch.
According to its bankruptcy filing, the company anticipates emerging from the proceedingsx “expeditiously”.
The company maintains “the vast majority of its suppliers and vendors will recover in full under a Chapter 11 plan.” Reader’s Digest estimated that it had more than 100,000 creditors all told, and has asked for additional time to submit full financial statements to the court.
Within its filings, the company cited practice of conducting “a wide-variety of innovative marketing strategies, promotions, merchandising practices and purchasing programs…and to pay prepetition obligations related thereto in the ordinary course of business and in a manner consistent with past practice.”
A list of the top 30 creditors includes several printing, shipping, data services and other direct marketing suppliers. Unless otherwise indicated, all of the following are trade claims.
Bank of New York (as trustee – 9% subordinated notes) -- $600 million
HCL -- $14,212,268.28
Williams Lea -- $8,867,402.12
CDS Global Inc. -- $5,421,407.34
Quad/Graphics -- $2,983,639.17
TI Circulation Holdings (contingent contract claim) -- $2,590,635.49
RR Donnelley Receivables Inc. -- $2,417,751.55
Quebecor World Inc. -- $2,349,793.12
Newpage Corp. -- $2,241,616.14
Harry Fox Agency Inc. -- $1,808,128.01
Myllkoski North America -- $1,646,889.64
Sony Music Special Products -- $1,070,127.08
SG Chappaqua A LLC c/o Greenfield Partners; SG Chappaqua B c/o Greenfield Partners; Summit Development -- $986,279.28
Universal Music & Video Distribution -- $980,896.8[sic]
Hung Hing Offset Printing Co. -- $831,607.03
Rhino Entertainment -- $802,641.88
Infocrossing Inc. -- $772,671.42
Federal Express Corp. -- $742,759.52
EDS Corp. -- $733,507.65
Anetorder Inc -- $666,509.65
A&E Television Networks (royalty claim) -- $651,568.25
Ignite Media Solutions -- $614,664.75
Fitness Brands Inc. (royalty claim) -- $600,000
Aegis USA Inc. -- $537,155.63
INO Records (royalty claim) -- $522,378.24
Cellmark Paper -- $514,256.97
Sony BMG Music Entertainment -- $474,558.42
Soul Train Holdings LLC (royalty claim) -- $400,000
Equifax Marketing Services -- $360,621.82
West Direct Inc., -- $341,436
