Is Its $2 Billion Debt Causing Problems for Reader’s Digest?

Reader's Digest magazineReader’s Digest Association (RDA), the owner of READER’S DIGEST, EVERYDAY WITH RACHAEL RAY and PURPOSE DRIVEN CONNECTION, may be in deep financial trouble.

According to Folio: magazine, an industry publication, RDA is likely not to make an interest payment on its senior subordinate notes that is due this coming week.  When contacted by Folio:, an RDA spokesperson said the company doesn’t comment on rumors.

RDA was purchased by Ripplewood Holdings in November 2006 for $2.4 billion.  As of March 31, RDA carried a consolidated debt of approximately $2.17 billion.  Earlier this year, it said it would eliminate approximately 280 employees, or 8% of its overall workforce, as part of what it called a “Recession Plan” roadmap.  This plan also included complete shutdown of operations for a week a year – these days will be unpaid, of course.  It also announced that it would outsource IT operations to India.  In March, RDA hired law firm Kirkland & Ellis and financial adviser Miller Buckfire to “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.”  But the company denied it might file for bankruptcy.

RDA has suffered in the soft advertising environment like all magazine publishers, but by a lesser degree.  For example, Readers Digest magazine saw ad pages drop only 8% and Everyday with Rachael Ray 14%, according to PIB figures.

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