Note: An earlier version of this story incorrectly stated that Reader’s Digest’s UK operations are under bankruptcy protection. Only the company’s US business. Reader’s Digest Association Inc., is undergoing Chapter 11 reorganization.
Reader’s Digest Association Inc. won’t turn the page on bankruptcy just yet. The company has delayed its emergence from Chapter 11 reorganization for its United States operations, which it entered in mid-August 2009.
The delay in the emergence stems from a last holdup in the Association’s United Kingdom operations. Recently, the U.K. Pensions Regulator indicated it will reject a proposed agreement between the trustees of its pension plan and the Kingdom’s Pension Protection Fund. The UK’s pension concerns, which first arose in 2002, predate the company’s Chapter 11 filing, as well as its current ownership.
Reader’s Digest Association, the US-based parent organization, received approval for its restructuring plan from the United States Bankruptcy Court for the Southern District of New York on Jan. 15, and management anticipates emerging from its reorganization within the next few weeks. According to a company spokesperson, the UK matter should be resolved within a matter of days.
When the U.S. portion of Reader’s Digest filed for Chapter 11 protection in late August, the company listed assets of $2.2 billion and liabilities of $3.4 billion.
According to the approved plan, when the U.S. entity 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.
Under the terms of the U.S. 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.
In March 2007, Ripplewood Holdings led a consortium of investors, including C.V. Starr & Co., Inc., Golden Tree Asset Management and the J. Rothschild Group in a transaction that resulted in the company being taken private.
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