Reader's Digest Files For Bankruptcy Over Debt
The publisher of Reader's Digest has filed for bankruptcy as it seeks to cut its debt burden of $465m (£300m).
RDA Holding Company, which owns the 91-year-old magazine, launched the action in a New York court on Sunday.
It is the second time in nearly four years that the venerable journal, once a mainstay in doctors' surgeries and grandmothers' homes, has sought to stave off closure.
The publisher has struggled to remain relevant in the digital age amid a shift by consumers from print to electronic media.
It has also tried to sell-off non-core elements as it tries to focus on its US market.
"We have had an ongoing process to simplify and rationalise our international business by licensing our local markets to third parties, to other publishers, to other investors," Reader's Digest boss Robert Guth said.
"And that has been a big part of our effort to streamline the company and bring in proceeds to bring down debt."
The eponymous title has up to now relied on a lucrative subscription customer base.
The firm publishes 75 titles worldwide, including 49 editions of the digest and three other titles.
The owners of Reader's Digest first floated the firm in 1990 and it was bought by private equity firm Ripplewood Holdings in 2007 for $1.6bn (£1bn), which included some $800m in debt.
The purchasers were subsequently hit by a massive drop in advertising spends and subscriber drop-off amid the global financial crisis.
The Chapter 11 filing was made in the US bankruptcy court in White Plains. The firm listed assets of more than $1bn (£645m) and debts of around $1bn ahead of equity restructuring agreed with Wells Fargo bank.
The final outstanding debt of $465m is forecast to be reduced by more than 80% to $100m by the end of the bankruptcy.
Chapter 11 allows US firms to reorganise under bankruptcy laws when it is unable to pay its creditors or service its debt repayments and empowers the trustee to operate the business.
If a separate Chapter 11 trustee is not appointed the debtor acts as trustee of the business.
As it seeks new life in the digital domain, the company said there had been over 450,000 downloads of its iPad app and cited its high ranking on the Kindle as positive signs.
"The much more modest debt level puts us in a position to continue to really execute these plans and push these brands forward well into the future, so it's a very good new lease on life," Mr Guth said.
"The Chapter 11 process, which will facilitate a significant debt reduction, will enable us to continue to redefine our business by focusing our resources on our strong North American publishing brands, which have shown a new vitality as a result of our transformation efforts, particularly in the digital arena."