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Is Reader's Digest Restructuring?

This story was written by Staci D. Kramer.
Reader's Digest Association Inc. has hired Kirkland & Ellis LLP to advise it on restructuring, Bloomberg News reports, citing a "person familiar with the situation." According to Bloomberg, the privately held company based in Pleasantville, New York, wants Kirkland & Ellis to evaluate options that could include a pre-packaged bankruptcy. A RDA spokesperson declined to comment to Bloomberg. Founded in 1922, RDA was a public company from 1990 through 2007, when an investor group led by Ripplewood Holdings LLC spent $1.6 billion to take it private again; the new owners also assumed $776 million in debt. 

Reader's Digest is the flagship; in addition to to its 50 editions, the company publishes 42 magazines and claims 18 million monthly unique visitors for its 65 branded websites. Its magazines are full of tips about healthy lifestyles but RDA is far from financially healthy, suffering from too much debt and slowing cash flow. In January, RDA cut 8 percent of its 3,500-member workforce and ordered furloughs across the board. Last month, Moody's and S&P each lowered its ratings of RDA's debt.

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But the company also has launched three new magazines so far this yearone based on Reverend Rick Warrens Purpose Driven Life and two other lifestyle mags. A restructuringeither through a pre-packaged bankruptcy or, possibly, out-of-courtcould remove enough of the pressure to get the highly leveraged company through this crisis. Would it be a stopgap or a real solution?

Sidenote: It was the second such report in a matter of hours involving Kirkland & Ellis from the same reporter at Bloomberg, Tiffany Karyeach based on a single source and raising bankruptcy as a possibility. The report on Blockbuster came before the market closed and the stock nosedived so deep that trading was halted ; a spokeswoman later confirmed the hiring but said it was to explore refinancing, not bankruptcy.

By Staci D. Kramer