Popular Reader's Digest magazine files for bankruptcy

Aug 18, 2009, 16:24 GMT

New York - Reader's Digest, once a favourite monthly magazine found in doctors' offices and on coffee tables, has filed for bankruptcy to cut a 2.2 billion-dollar debt, The Wall Street Journal said Tuesday.

The magazine is the latest of several debt-laden media companies in the United States to succumb to the recession, which is also weighing on most major newspapers. Major media casualties this year include the Chicago Sun-Times, which filed for bankruptcy in March, and Denver's Rocky Mountain News, which shut down in February.

Reader's Digest is apparently in worse shape than many other companies because of its debt.

The Chapter 11 bankruptcy filing under US laws would allow Reader's Digest to reduce its debt from 2.2 billion dollars to about 550 million dollars, the Journal reported.

The magazine's ownership changed hands in 2007 when it was bought by the private equity firm of Ripplewood Holdings for 1.6 billion dollars. Ripplewood Holdings' investment is now wiped out and its lenders, JP Morgan Chase and Company, will take control of the company, the report said.

Reader's Digest, with headquarters in Pleasantville, New York, has had a storied history since it began publishing the pocket-sized magazine in the early 1920s. At its peak the magazine sold 18 million copies, which were translated into several foreign languages.

Like other US publications hit hard by the worsening economy in past years, Reader's Digest has faced circulation declines as readers switched to special interest publications.

Chapter 11 bankruptcy filing requires a reorganization of the magazine, but it has not yet gained support of all its creditors for the changes, the newspaper said.