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Readers' Digest To File For Bankruptcy

Tyler Durden's picture


In a jarring reminder that hope does not pay scheduled interest payments, Readers' Digest announced it is about to file for bankruptcy. And since bondholders don't accept hope in lieu of cash, the company announced that not only would it not make its $27 million coupon payment but that it would undergo a prearranged Chapter 11 process in which its secured lenders would end up owning the company concurrent with a 75% haircut in their holdings.

From the recent press release:

The agreement in principle includes a commitment from certain members
of the senior lender group to provide $150 million in new money
Debtor-in-Possession (DIP) financing, convertible into exit financing
upon emergence, which the company expects will ensure sufficient
liquidity during the reorganization process and beyond. In addition to
providing RDA with the necessary capital to emerge from Chapter 11, the
arrangement also establishes the substantive terms of the $550 million
in debt that will remain on RDA's balance sheet upon emergence, a 75
percent reduction from the current $2.2 billion in debt.

Alas the optimism presented 3 months ago by William Adler, VP of Communications, ended up being just a lot of hot air, much like the mysterious bid pushing the market higher since March. From an informative May article:

The company has "no plans whatsoever to file Chapter 11," said Adler,
and is in compliance with all its debt covenants. The most likely
outcome for the company would be for Kirkland & Ellis and Miller
Buckfire to attempt to negotiate some sort of out-of-court
restructuring with the creditors.

Luckily someone benefitted from the deal:

At the time, many analysts believed Ripplewood had out-negotiated
Reader's Digest and faulted both its board of directors and its
financial advisors, Goldman Sachs, which received an $11 million fee
for its advice, and former Goldman banker Michael Lynch, who received a
$2.75 million fee, for failing to get a better deal for shareholders.
Lawsuits on their behalf against Reader's Digest, Ripplewood and its
co-investors were later settled. (Ripplewood, Goldman and Miller
Buckfire all declined to comment for this story.)

The bankruptcy will be a swift blow to the LBO sponsors who acquired the company in November 2006:

There was a surfeit of optimism when Ripplewood and its
co-investors agreed to take the Reader's Digest Association private in
November 2006 for $17 per share, at an aggregate value of $2.4 billion.
"We are very excited to reach this agreement to acquire Reader's
Digest, a truly wonderful company with a broad array of global assets
and growth businesses that are extending a rich heritage,"
Tim Collins
said back then. Of the equity account of $375 million, Ripplewood
invested $275 million. (Its co-investors: J. Rothschild Group;
GoldenTree Asset Management; C.V. Starr & Co.; GSO Capital
Partners, now part of the Blackstone Group; Merrill Lynch, now part of
Bank of America; and Magnetar Capital, an $8 billion hedge fund founded
by Alex Litowitz.)

One wonders what Tom Collins carry at Ripplewood is valued at these days. At least the company got a nice hat tip in the "we are dead" press release filed today:

"We also thank our sponsor Ripplewood Holdings, who has provided
inspired vision and stewardship over the last two and a half years,
including during this process," added Berner. In March 2007, Ripplewood
led a consortium of investors in a transaction that resulted in the
company's acquisition. All of the members of the company's Board of
Directors who have served since the March 2007 acquisition, with the
exception of Berner, have resigned from the company's Board. The two
recently appointed directors also continue to serve on the Board.

One wonders if Ripplewood's LPs share the same gratitude for the PE firm, which managed to destroy $275 million in equity value in less than 3 years.


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Mon, 08/17/2009 - 13:27 | 38934 MsCreant
MsCreant's picture

This would be happening without the financial crisis. Print media is on its way out the door in general. This one would, of course, be one of the first ones to go. Too old fashioned even if the internet wasn't around.

Mon, 08/17/2009 - 14:31 | 38996 Jacks Complete ...
Jacks Complete Lack of Surprise's picture

I heard print media was on its way out on talk radio, which tv supposedly made old fashion.

Mon, 08/17/2009 - 15:06 | 39034 Ghettomedic
Ghettomedic's picture

The people who read Reader's Digest don't use the internet. It's marketed towards old people who want to be scared by the "10 Things Your Doctor Won't Tell You" headlines and laugh about the Humor in Uniform stuff. They have large print edition as well just for this audience. That audience, however, is dying off and becoming senile.

Mon, 08/17/2009 - 17:03 | 39191 Anonymous
Anonymous's picture

to be replaced by another cohort of old senile
people who will die without end...
or will they still be reading details into their

Mon, 08/17/2009 - 13:45 | 38950 Project Mayhem
Project Mayhem's picture

Haha co-investors included J. Rothschild  that's pretty fuckin' fail for the family that owns the Fed.  Enjoy the 75% haircut you satanic motherfuckers.


In 1980, Jacob Rothschild, 4th Baron Rothschild resigned from N M Rothschild & Sons and took independent control of Rothschild Investment Trust (now RIT Capital Partners, the UK's largest investment trust.) He went on to found J. Rothschild Assurance Group (now St James's Place Capital) with Sir Mark Weinberg in 1991.[9]"

Mon, 08/17/2009 - 14:14 | 38974 Cheeky Bastard
Cheeky Bastard's picture   read all the people on the list ( there are not to many), and read the net worth Evelyn has ... and mind the source of that information ..

Mon, 08/17/2009 - 15:41 | 39072 Anonymous
Anonymous's picture

Is Bernard Madoff on the list?

Mon, 08/17/2009 - 16:13 | 39120 Project Mayhem
Project Mayhem's picture

Most of the people on that list would be Luciferian.  Interesting nonetheless.  In any case, I'm pretty sure Rothschild has more than $1.5 trillion -- but still, the idea that any one family has net worth in the trillions is somewhat mind blowing. 


Source: ** Federal Reserve Directors: A Study of Corporate and Banking Influence ** - - Published 1976

House Banking Committee Staff Report


"Chart 1 reveals the linear connection between the Rothschilds and the Bank of England, and the London banking houses which ultimately control the Federal Reserve Banks through their stockholdings of bank stock and their subsidiary firms in New York. The two principal Rothschild representatives in New York, J. P. Morgan Co., and Kuhn, Loeb & Co. were the firms which set up the Jekyll Island Conference at which the Federal Reserve Act was drafted, who directed the subsequent successful campaign to have the plan enacted into law by Congress, and who purchased the controlling amounts of stock in the Federal Reserve Bank of New York in 1914. These firms had their principal officers appointed to the Federal Reserve Board of Governors and the Federal Advisory Council in 1914. In 1914 a few families (blood or business related) owning controlling stock in existing banks (such as in New York City) caused those banks to purchase controlling shares in the Federal Reserve regional banks. Examination of the charts and text in the House Banking Committee Staff Report of August, 1976 and the current stockholders list of the 12 regional Federal Reserve Banks show this same family control."


In my opinion, the network of organized international corruption is not exclusive to any single group -- what these various criminal groups have in common is their worship of evil, and preference of fraud, deceit, murder, betrayal etc in order to accomplish their objectives. 



Mon, 08/17/2009 - 16:17 | 39131 Cheeky Bastard
Cheeky Bastard's picture

all that + their 100% ownership of Gold Exchange. Meaning; not only is it terrifying that all gold is being transacted trough only 1 institution, but just imagine the daily amount of money that the owners " earn " from fees

Mon, 08/17/2009 - 13:44 | 38952 phaesed
phaesed's picture

wow, the rothschild's are in on reader digest? That's funny they'll fail, must be super long those CDS's.

Mon, 08/17/2009 - 13:44 | 38953 Anonymous
Anonymous's picture

Writers cramp, readers digest. In the belly of bondholders, courts & trustees.

The PacMan cometh. Gobbling good companies near you.

Mon, 08/17/2009 - 17:53 | 39080 rabblerouse4
rabblerouse4's picture


Risk as it pertains to ... ? Backstop behind the SLPz? So, conceivably, a "past ball" (not seen coming, i.e. flashed in a dark pool) thrown in the dirt could get by the catcher and roll how far (without a backstop)? There is no risk when Bernanke is the umpire behind the plate.
His message was being spread and gaining even more support...therefore he needed to be censored. Until we have guys like Black back as regulators nothing will change. We just

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Mon, 08/17/2009 - 13:49 | 38957 Anonymous
Anonymous's picture

Reader's (in-)Digest(-ion)?

Sorry. Somebody cue the 'fail' sound from The Price is Right for that stinker. That was a bit predictable.

Mon, 08/17/2009 - 14:07 | 38969 Anonymous
Anonymous's picture


Mon, 08/17/2009 - 13:52 | 38959 Anonymous
Anonymous's picture

Nothing exemplifies the junk rally like Rosetta Stone. Listen up other garbage discretionary stocks, this chart action awaits you

Mon, 08/17/2009 - 13:58 | 38963 Project Mayhem
Project Mayhem's picture



"It has now become clear that this was no ordinary crash. Iceland's special investigation into "suspicions of criminal activity" at the three banks is likely to stretch from Reykjavik to London, Luxembourg and the British Virgin Islands."


Mon, 08/17/2009 - 14:37 | 38999 bruiserND
bruiserND's picture

 Thank you for the research.

Sound familar?


"the population is in revolt over the bill they have to pick up for the excesses of a few wealthy men.

So how are these investigations likely to end? One major issue faced by the investigators is the tightly-knit nature of the financial community, where family and friendship ties are everywhere. "

Mon, 08/17/2009 - 14:04 | 38966 kidSmart (not verified)
kidSmart's picture

today looks like its setting up for another EOD pumpfest. It would be nice to get a solid selloff.

Mon, 08/17/2009 - 14:11 | 38971 Cheeky Bastard
Cheeky Bastard's picture

think not; the fuckers are just teasing the shorts to go heavy. they will trade sideways until 3:30 EST and then will ramp the bitch up, and the INDU will be -50. SPX - 7, and NASDAQ - 20 ... mark my words ... thats standard operating procedure ... seen it to many times in the past 5 months not to recognize it ..

Mon, 08/17/2009 - 14:17 | 38977 Anonymous
Anonymous's picture

After watching Friday's close you'd need brass balls to hold short positions past 3:30.

Mon, 08/17/2009 - 14:20 | 38981 Anonymous
Anonymous's picture

You'd need balls of brass to hold shorts past 3:30 after watching Friday's close.

Mon, 08/17/2009 - 14:09 | 38970 ptoemmes
ptoemmes's picture

What am I gonna read waiting for my proctologist appointment?

Oh wait - I don't need a proctolgist anymore either.

Thank you GS, JPM, the Fed, the Treasury, ...



Mon, 08/17/2009 - 14:21 | 38982 chunkylover42
chunkylover42's picture


Are you sure you don't need a procto to get those guys out of your a$$?  I know I could use one for that reason...

Mon, 08/17/2009 - 14:17 | 38975 MsCreant
MsCreant's picture

Cue Led Zep...

Going down now, going, going, down......

I just want it to tank!

Is that bad?

Mon, 08/17/2009 - 14:20 | 38980 Anonymous
Anonymous's picture

Wait for EMI to kick it and give Guy Hands a nice blot on his record. Plenty of LBO disasters ready to implode Toys R Us maybe, Tumi, Jimmy Choo?

Mon, 08/17/2009 - 14:26 | 38989 Anonymous
Anonymous's picture

I've heard of recoveries shaped like V,W,L, and U. Leon Cooperman calls it the square root sign recovery.

This guy from DB says it will be a triple U. He sounds frighteningly realistic.

Mon, 08/17/2009 - 14:53 | 39018 Anonymous
Anonymous's picture

I think it's gonna be a zero.

Tue, 08/18/2009 - 06:00 | 39646 ED
ED's picture

Alphabet soup. I knew those Digests were good for something

Mon, 08/17/2009 - 14:27 | 38991 Anonymous
Anonymous's picture

Did not take long for the GS conspiracy horseshit to turn into Jewish conspiracy horseshit. Maybe the Rothschilds are in it together with GS?

TD could you please post the Protocols of Zion, as well as an extrapolation of its premises to an anlysis of the current situation with GS and the fall of the free markets? I believe some of your readers are dying for that shit.

Mon, 08/17/2009 - 14:47 | 39011 Anonymous
Anonymous's picture

nah...I think most of us are fine with the goldman self dealing truth is better than fair dealing...keep pointing out the little things most of us miss due to time constraints

Mon, 08/17/2009 - 17:53 | 39078 rabblerouse4
rabblerouse4's picture

Thanks, I saw the headlines on MW, and was wondering if there was a connection.

Risk as it pertains to ... ? Backstop behind the SLPz? So, conceivably, a "past ball" (not seen coming, i.e. flashed in a dark pool) thrown in the dirt could get by the catcher and roll how far (without a backstop)?

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Mon, 08/17/2009 - 14:52 | 39017 lizzy36
lizzy36's picture

As a MOT and a long time reader i can say with a great deal of confidence that their is an absolute lack of "Jewish conspiracy horseshit" on ZH. 



Mon, 08/17/2009 - 15:01 | 39029 Cheeky Bastard
Cheeky Bastard's picture

lizzy, baby, WTF is a MOT

Mon, 08/17/2009 - 15:10 | 39039 lizzy36
lizzy36's picture


mot means "member of the tribe". shorthand for being a Jew.

Mon, 08/17/2009 - 15:13 | 39040 Cheeky Bastard
Cheeky Bastard's picture

lol, my mothers grandfather was Jewish, but he changed the last name to something more non-Jewish back in the 1890s. Thank for clarification about what MOT means and sorry for WTF part of my question.

Mon, 08/17/2009 - 15:21 | 39047 lizzy36
lizzy36's picture

cheeky from you, no apology ever necessary.....i appreciated the wtf part.

Mon, 08/17/2009 - 15:24 | 39051 Cheeky Bastard
Cheeky Bastard's picture

OK, thanks


I'm not the most tactical person when it comes to asking something or answering something; my style is ChiTown style ... and i can seem rude sometimes ...

Mon, 08/17/2009 - 15:51 | 39087 lizzy36
lizzy36's picture

neither am i...

no worries. i enjoy your style.

Mon, 08/17/2009 - 14:56 | 39023 curbyourrisk
curbyourrisk's picture

Die Cerberus.......DIE!!!!  I wanna see these bastards go down!

Mon, 08/17/2009 - 14:56 | 39024 Anonymous
Anonymous's picture

Does anyone beside me think that Reader's Digest going tits up at the very moment in time when His Royal Highness King Obammy nationalizes medicine is a coincidence?

There will be 2 million less waiting rooms under the new plan. That would account for the last 2 million RD subscriptions.

He's gonna need to bail them out. I'm sure of it.

Mon, 08/17/2009 - 15:02 | 39030 Ghettomedic
Ghettomedic's picture

Everyone I know that reads Reader's Digest is either 1. A toothless pensioner who went back to work as a WalMart greeter when their "Can't lose in this market" portfolio crapped out in 2008 or 2. Deceased.


Other than that, there's the free copy I find in my doctor's office when I use the shitter.

Mon, 08/17/2009 - 23:26 | 39032 My cognitive di...
My cognitive dissonance's picture


They're printing what you wrote and putting it in Reader's Digest - Lifes Like That.

Should be good for a laugh.

Mon, 08/17/2009 - 17:54 | 39075 rabblerouse4
rabblerouse4's picture

You'd need balls of brass to hold shorts past 3:30 after watching Friday's close.

Risk as it pertains to ... ? Backstop behind the SLPz? Until we have guys like Black back as regulators nothing will change. We just

good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions

Mon, 08/17/2009 - 15:44 | 39076 mtremus
mtremus's picture

I thought the recession was over?   Not

Mon, 08/17/2009 - 20:49 | 39384 calgaryschmooze
calgaryschmooze's picture

I don't have time to read Tyler's post.  Could someone please give me the Reader's Digest summary?

Tue, 08/18/2009 - 06:45 | 39664 Anonymous
Anonymous's picture

I hope the Chapter 11 filing was put in the 'YES' envelope.

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