Reader's Digest files for bankruptcy

Reader's Digest - for the second time - has filed for bankruptcy. Falling sales, a fuddy-duddy musty image, an increasing shift to online content and falling advertising rates have all hit the stalwart brand hard.

The brand had attempted an image overhaul. But massive debts and troubled cashflow have hobbled progress.

Digesting debt

Private equity player Ripplewood Holdings bought the publisher for £1bn in 2007. This sum also absorbed $800m in debt. However Reader's Digest is hoping for a revitalised life online as its new US Chapter 11 filing should allow it to drastically reorganise its debt load under a restructuring agreement.

"We have had an ongoing process to simplify and rationalise our international business by licensing our local markets to third parties, to other publishers, to other investors," Reader's Digest boss Robert Guth is quoted by Sky.

Focusing resources "on our strong North American publishing brands," Guth adds, "which have shown a new vitality as a result of our transformation efforts, particularly in the digital arena."

Still relevant?

So Reader's Digest will continue to publish (it has 75 different magazines globally). Clearly some investors believe the brand has value. The flagship print magazine remains read by around 25m, claims the company.

But past emphasis on traditional family values and interests - improving your vocabulary or advice on deportment and domestic economy - make it an uncomfortable marketing proposition for many markets now.

"The much more modest debt level puts us in a position to continue to really execute these plans," Guth is reported by Bloomberg, "and push these brands forward well into the future, so it's a very good new lease on life."

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