Updated: RDA Nears End of Bankruptcy

A judge Jan. 15 approved Reader’s Digest Association’s restructuring plan, paving the way for the publisher to emerge from bankruptcy by Jan. 31.
The publisher of Reader’s Digest and Every Day with Rachael Ray, burdened by debt from its 2007 takeover by Ripplewood Holdings, filed a prepackaged bankruptcy plan with new lenders in August that would cut its debt to $550 million from $2.2 billion.
Its turnaround plans hampered by the recession, RDA has been forced to slash headcount, cut Reader’s Digest’s rate base and move to trade its historic Westchester headquarters for offices in Midtown New York.
With the ruling, over the opposition of retirees who complained that they would see little recovery from the ruling, RDA said it expects to emerge from bankruptcy by the end of the month.

“There are people who are living modestly and will have to sell their homes,” said one member of a group of ex-employees who got less than 4 cents on the dollar as a result of the restructuring. “They couldn’t handle an interruption in income like this.”
Those affected were a subset of about 285 former employees receiving a supplementary pension benefit. They are part of a group of current and former employees of about 4,900 whose core pension and medical benefits are unchanged, according to RDA.
An RDA rep said the company’s lenders, outside the bankruptcy plan, agreed to create a $1 million hardship trust to benefit some of the members of the 285. “This is designed to reach those who truly have hardships,” the rep said.

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