Source: Company Press Release
 
The Reader's Digest Association, Inc. (RDA), a global multi-brand media and marketing company, today announced it has filed voluntary pre-arranged petitions under Chapter 11 of the United State Bankruptcy Code, as part of the company’s previously announced restructuring plan. Prior to the filing, more than 80 percent of the company’s senior secured lenders had signed on to the agreement in principle. The filing applies only to the RDA’s U.S. businesses — its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be part of the filing.
 
RDA’s senior lender group has committed $150 million in new Debtor-in-Possession (DIP) financing, which is convertible into exit financing upon emergence. The company believes this DIP financing will ensure sufficient liquidity during the reorganization process and beyond, and RDA’s international operations will have adequate funding based on continuing operations and access to proceeds from the DIP financing.
 
The company has filed a number of motions to ensure that the filing does not adversely affect day-to-day operations for its employees, customers or suppliers. RDA is seeking – and fully expects to receive – approval for a variety of first-day motions, including requests to honor its customer obligations. Suppliers and vendors who provide goods and services to the company on or after August 24, 2009, will continue to be paid in the ordinary course.
 
Mary Berner, RDA’s President and Chief Executive Officer, said, “Our business operations remain solid, with anticipated Fiscal 2009 revenue only down by low single digits, currency neutral, despite the recession. 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.”
 
RDA previously announced on August 17, 2009 that it had reached an agreement in principle with a majority of its senior secured lenders on the terms of a restructuring plan to significantly reduce its debt burden and strengthen the company financially for the future. Under the agreement, RDA’s senior lenders would exchange a substantial portion of the company’s $1.6 billion in senior secured debt for equity, effectively transferring ownership to the lender group. The agreement also establishes the substantive terms of the $550 million in debt that will remain on RDA’s balance sheet upon exit.