Source Interlink to Go Private

Troubled major magazine wholesaler Source Interlink Companies, one of the firms at the center of a major magazine distribution crisis earlier this year, announced today it is going private as a result of a debt-restructuring deal with its lenders that wipes out $1 billion in debt.

Source was one of two wholesaler giants that asked publishers for an extra 7-cent-per-copy fee to deliver magazines earlier this year to stay solvent. Publishers balked, and the second one, Anderson News, went out of business as a result of the fracas, which caused widespread disruptions in the distribution chain and an undetermined amount of loss in publishers’ newsstand sales.

The deal provides $100 million in additional liquidity as well as wiping out the debt. Under the terms, Source filed a reorganization plan under Chapter 11, which it expects to complete in 35 days.

Source Interlink chairman and chief executive officer Greg Mays said in a statement announcing the deal, “We couldn’t be more pleased. This restructuring will materially reduce our interest expense and debt levels, substantially improve free cash flow and allow us to capitalize on several operational opportunities to further improve and grow our business.”

Executives from magazine distributors Curtis and Comag were quoted in the announcement as saying they supported the restructuring.