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Is Nothing Sacred in This Recession? Reader's Digest Set to File for Bankruptcy

Reader's Digest -- an American media icon of the 20th century, thanks to its inspiring, safe-for-family-reading articles and folksy, cornpone humor -- is planning to file for Chapter 11 bankruptcy reorganization.

Parent company Reader's Digest Association has had trouble since going private in 2007, cutting costs and trying to stay relevant in the post-ironic, niche-driven 21st-century media landscape, a place than can be tough sledding for an earnest, general-interest magazine. The magazine still maintains it is the world's largest paid circulation magazine, selling 8 million copies per month in the U.S.

According to the magazine's demographic research, the median age of a Reader's Digest reader is 52 and has a household income of about $58,000.

The bankruptcy would apply only to Readers Digest U.S. holdings. Its businesses Canada, Latin America, Europe, Africa, Asia, Australia and New Zealand would be unaffected. The publication has offices in 44 nations, a testament to the magazine's onetime ability to distill and distribute content around the world.

“Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives,” president and chief executive Mary Berner said in a statement.

Debt is hurting Reader's Digest; the bankruptcy plan -- which has been accepted by creditors -- allows it to cut debt from $2.2 billion to $550 million.

When a public company goes private, it has to buy back stock from shareholders to get it all out of circulation. To do so usually requires borrowing money. If you over-borrow and under-perform, then you get a debt problem. This is exactly what has happened to media giant Tribune in its $13 billion going-private transaction in 2007 and why it declared bankruptcy one year later.

Folio: magazine reported on Friday that Reader's Digest was in danger of missing a loan payment this week, which may have spurred today's news of the pending restructuring.

In January, the magazine fired eight percent of its staff in a cost-cutting move.

If we had been paying closer attention to Reader's Digest, we would have noticed this December 2008 note from Standard & Poor's lowering its issue-level rating on the magazine's parent company's senior secured debt, saying that company "would be sold as part of an orderly liquidation following a default."(!)

The magazine was founded in 1922 with the idea of condensing articles from other magazines. Popular features were added, including "Humor in Uniform," "Increase Your Word Power" and "Life in These United States."

The magazine's 1952 "Cancer By the Carton" series, linking smoking to cancer, was the first major blow suffered by the tobacco industry and spurred government and legal action against the industry, leading to public health campaigns against smoking.

-- Frank Ahrens
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By Frank Ahrens  |  August 17, 2009; 12:39 PM ET
Categories:  The Ticker  | Tags: Reader's Digest, bankruptcy  
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Comments

I'm scrolling down opening a pack and now this? I have an old Commonwealth Bank Zippo. Money is burning here. Something is going to get you. Something is sacred. Time!

Posted by: Dermitt | August 17, 2009 1:02 PM | Report abuse

Good riddance.

Over the years it's become more and more a shameless, right-wing GOP propaganda rag.

The pages are too small to line the birdcage.

Posted by: republican_disaster | August 17, 2009 1:09 PM | Report abuse

good, hopefully their dumb sweepstakes dies with them. How many elderly people have been duped by them.

Posted by: granite1 | August 17, 2009 2:23 PM | Report abuse

I always attributed the massive stupidity of so many elderly Americans to their reading that rag.

Good riddance!

Posted by: darling_ailie | August 17, 2009 2:36 PM | Report abuse

It's about time. What a waste of paper for umptee-ump years.

Posted by: adrienne_najjar | August 17, 2009 2:41 PM | Report abuse

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Posted by: Bellalou | August 17, 2009 2:57 PM | Report abuse

Readers' Digest lost all credibility when its "poll" had Dewey defeating Truman.

And look what has happened -- Gallup Organization and its spinoff, the Pew Research Center, are zillion-dollar outfits.

Reader's Digest? Feh.

Posted by: bs2004 | August 17, 2009 3:12 PM | Report abuse

Reader's Digest does indeed deserve recognition for being among the first to speak up on tobacco.

The scientific evidence on tobacco started to arrive in the late 30's and by the early 50's it was compelling. But the public didn't read scientific journals. And cigarette ads were big bucks for newspapers -- and few stories on the subject were printed.

The Reader's Digest, starting in 1952, was almost a lone voice informing the public. Very few other voices arrived until the first Surgeon General's report in 1964. Reader's Digest had to pretty much go it alone for over ten years.

We can estimate very conservatively that Reader's Digest saved over a hundred thousand lives. The actual figure could be ten times that.

Posted by: jpk1 | August 17, 2009 3:23 PM | Report abuse

I thought we tightened bankruptcy laws or was that just for individual consumers? How many debtors who are now going to get pennies on the dollar are now either going to have to declare bankruptcy or go out of business? Where can I get in on this action?

Posted by: SarahBB | August 17, 2009 3:32 PM | Report abuse

We canceled our subscription years ago. They took a turn to the conservative-right, and constantly had articles bashing the left and even the center right. It's a shame. This kind of magazine, should never have had politics injected into it. It's not supposed to be that kind of magazine.

Posted by: autowx | August 17, 2009 3:39 PM | Report abuse

Yet another leveraged buyout bites the dust. We need to amend the Internal Revenue Code to make LBOs less attractive.

What happens in a typical LBO? The target gets stuck with a mountain of debt that can only be repaid if things work go exactly as planned, while management and the bankers skim all the cash. Target fails, American workers lose their jobs, while management and bankers vacation in at 5-star resorts.

Posted by: Garak | August 17, 2009 4:01 PM | Report abuse

I'll bet a lot of the debt they are dumping is their US pension plan. Employees will only get a fraction of their promised pension when it's dumped on the government's Pension Benefit Guaranty Corporaton -- already in debt because corporations don't want to pay people after decades of hard work.

Posted by: TwoEvils | August 17, 2009 4:06 PM | Report abuse

The good news is that RD is in bankruptcy. The bad news is that it will recover. I long ago gave up on RD for responsible journalism. Too bad. It once served an important purpose. No longer.

Posted by: Gondola1 | August 17, 2009 4:07 PM | Report abuse

Obviously "republican_disaster" hasn't read Reader's Digest in a while. Over the last two years it has become a shameless, left-wing socialist propaganda rag.

Posted by: bewalsh | August 17, 2009 4:13 PM | Report abuse

OMG...Between "Death Squads" and the decline of Readers Digest the life of a Senior American ain't worth living.

Posted by: willandjansdad1 | August 17, 2009 4:31 PM | Report abuse

I wonder if Reader's Digest readers will be able to digest the thought of bankruptcy.

Posted by: sasquatchbigfoot | August 17, 2009 4:58 PM | Report abuse

Good riddance! Hopefully, this right wing rag goes out of business.

Posted by: Socialistic | August 17, 2009 5:12 PM | Report abuse

You know the world has changed when Reader's Digest files for bankruptcy. When I was growing up, everybody read that magazine.

Posted by: tinyjab40 | August 17, 2009 5:32 PM | Report abuse

Why did it take so long? Does ANYONE outside a retirement home or doctor's office read this?

Posted by: John1263 | August 17, 2009 6:08 PM | Report abuse

If this is not proff that the right wing types don't read, nothing is. RD had turned in to a predominately republican rag years ago.

Posted by: kansasgal1 | August 17, 2009 6:16 PM | Report abuse

make that proof

Posted by: kansasgal1 | August 17, 2009 6:16 PM | Report abuse

That's too bad, Readers Digest was an important part of my childhood, both at home and at school. I couldn't wait to read it every month. I still have really old condensed books - from the 30's and 40's, I would guess. It was such a pleasure to be able to read them, and they certainly fostered my love of reading.

But times and tastes change, and Readers Digest just didn't appeal to me as I grew up. And that's too bad, because I imagined that my children and grandchildren would enjoy it as much as I did.

Posted by: momj47 | August 17, 2009 6:18 PM | Report abuse

I read RD every month and look forward to my next mag. Those commenting on its left wing stances, obviously hve not read RD lately. I am over 50 and find the articles refreshing and informitive. Just the latest edition had some benifitual info on raising your good colestorol. I can understand the younger generation not being particularly interested in its contents BUT DON'T KNOCK OLD AGE-- TRY AND REACH IT--- WE DID!!! and still enjoy reading about MOM and Apple pie.... and another note... this is America... NO ONE FORCES YOU TO BUY OR READ IT>>>>

Posted by: rkmech11 | August 17, 2009 6:34 PM | Report abuse

This is usch good news...one of the larger disseminators of twisted information with a wingnut GOP spin, is finally falling by the wayside. I am sure they are just as proud of their accomplishments as a religion is of it's sinners, or a bigot of his sincerity. I hope everyone concerned suffers terribly.

Posted by: owlafaye | August 17, 2009 8:19 PM | Report abuse

Readers Digest...an antiquated monthy espousing (and supporting)the view of the american plutocracy.You get what you work for,Yes,there is a God and he is looking out for you.Our Brave fighting men,defending democracy !The USA is great,GREAT,GREAT !!!
Oy vey !
Pure propaganda,more sophisticated than Russia's Pravda,but the same,only westernized.

Posted by: hyroller56 | August 17, 2009 9:36 PM | Report abuse

Readers Digest...an antiquated monthy espousing (and supporting)the view of the american plutocracy.You get what you work for,Yes,there is a God and he is looking out for you.Our Brave fighting men,defending democracy !The USA is great,GREAT,GREAT !!!
Oy vey !
Pure propaganda,more sophisticated than Russia's Pravda,but the same,only westernized.

Posted by: hyroller56 | August 17, 2009 9:39 PM | Report abuse

I am 29 years old. I am as liberal as a person can possibly be. And I have LOVED reading Readers Digest since I was a little girl. My dad bought me my own subscription of it several years ago and I read it from cover to cover every month. I would miss it very much if it were to not be published anymore.

Posted by: ross206 | August 17, 2009 11:58 PM | Report abuse

Reader's Digest has been the one and only media that reflects the good things in life. It has always reported on uplifting stories and heroes in today's times. I have been reading the magazine all of my life. That and Playboy. They both have kept me happy. I am really sad to see Reader's Digest going down. What really makes me sad is the fact that my Father-in-Law worked for Reader's Digest for 37 years. He was retired early when it was purchased years ago, cutting his pension in half, and now his pension will be wiped away. Just another trauma in the pursuit of digital data. I do get all of my news from the internet, but damn, you still need some good reading on the john!!!

Posted by: chubby4 | August 19, 2009 3:44 PM | Report abuse

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