NEW YORK (Reuters) – Reader’s Digest Association Inc said on Thursday that lenders representing almost 80 percent of its senior secured debt have agreed in principle to the magazine publisher’s restructuring plan.
The media company, known for its namesake magazine, also said that 70 percent of investing institutions signed on to the terms of its proposal to lower its debt.
Reader’s Digest had said on Monday it planned to file for Chapter 11 bankruptcy protection within 15 days for its U.S. businesses as part of a prearranged plan with lenders to cut debt by 75 percent to $550 million from the current $2.2 billion. It also said on Monday it expected to conclude the restructuring process within 45 to 90 days.
Last week, Reader’s Digest, which was bought in 2007 by an investor group led by Ripplewood Holdings LLC, chose not to make a $27 million interest payment on notes due in 2017, choosing to use a 30-day grace period to negotiate with lenders.
The plan would also allow the company to reduce its annual interest payments on the remaining debt to less than $80 million from about $145 million
Reader’s Digest, based in Pleasantville, New York, has said it is the largest selling magazine in the world. It has offices in 45 countries and sells books, magazines, recorded music collections and home videos.
Ripplewood will have no ownership stake going forward either in the United States or internationally.
Reader’s Digest is the latest media company to be hurt by an economic slowdown that has cut ad spending and hampered companies’ abilities to repay debt.
Under the plan, the company will work with lenders to swap a portion of its $1.6 billion in senior secured debt for equity, and transfer company ownership to the lender group.
The agreement, which is subject to court approval, also includes a commitment from some members of the senior lender group, led by JP Morgan Chase (JPM.N), to provide $150 million in debtor-in-possession financing, which would help fund operations during the reorganization. (Reporting by Chelsea Emery and by Phil Wahba, editing by Tim Dobbyn)