Parent of Reader’s Digest seeks bankruptcy protection

The parent company of Reader’s Digest – that venerable doctor’s office fare – will look toward bankruptcy court to restructure its debt load.

Reader’s Digest Assn. said Sunday that it will file Chapter 11 reorganization petitions for its U.S. operations. The company said the move will allow it to reduce its debt load by 80%. Its international operations will not be reorganized through these petitions, the company said.

“After considering a wide range of alternatives, we believe this course of action will most effectively enable us to maintain our momentum,” Chief Executive Robert E. Guth said in a statement.

The company said it aims to convert about $465 million in debt to equity and reduce about $105 million worth of other corporate financing. Agreements with more than 70% of its note holders have been reached, the company said.

The bankruptcy is not expected to affect the day-to-day operations. The company has suffered from revenue declines in its book and home entertainment operations, according to the company’s most recent quarterly report, for the three months ended Sept. 30.

For that period, revenue dropped 26.3% from the same period a year prior and the company posted a net loss of $107.2 million.

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