Much like the Blockbuster (NYSE: BBI) "false alarm" saga, Reader's Digest Association is also denying vehemently that it is planning to file for a pre-packaged bankruptcy. The rumors came about after the media company hired Kirkland & Ellis LLP to advise it on restructuring, and the news about it came out last week on Bloomberg. Now, in a memo and media statement sent out by RDA CEO Mary Berner (picked up here), she explained the purpose of the firm's hiring: "RDA has proactively hired respected law firm Kirkland & Ellis, which advises companies on a vast array of corporate matters, as well as a top financial advisor, Miller Buckfire, to advise us on a wide range of restructuring and financing issues. We want to have the best advisors as we navigate this incredibly difficult economy, and retaining companies like these ensures that we will be well prepared and well advised. They will assist the company in staying ahead of the problems in the market by exploring strategic initiatives, including (but not limited to) raising additional capital and easing our debt burden."
She continues on to say that the reports about RDA considering filing for bankruptcy are not true. And then outlines some progress made in this difficult economy: "[W]e continue to meet our debt covenants and in no way are we in default under our financing arrangementsthe company expects to achieve $50 million in additional second-half Fiscal 2009 EBITDA from the cost savings associated with the Recession Plan and IT outsourcing initiative. In many ways, our businesses are outperforming competitors" Which of course only means there's aren't that many competitors or benchmarks left to measure one by these days, or at least everyone is in the same bucket, more or less.
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. In January, RDA cut 8 percent of its 3,500-member workforce and ordered furloughs across the board.
By Rafat Ali