Readers Digest To Declare Bankruptcy
UPDATED 9:24 A.M. EDT (U.S.A.) “Life in These United States” now means that staid Reader’s Digest, hamstrung by debt during a recession and competing in an era unfriendly to print publications, will declare bankruptcy.
The news comes on the heels of an announcement Friday by the FDIC that five more U.S. banks had failed, bringing the unofficial year-to-date total to 77. Only three banks failed in 2007.
One of Friday’s failed banks — Dwelling House Savings & Loan — told the Pittsburgh Business Times that fraudulent automated transactions had drained $3 million (more than 21 percent of deposits) from the small institution. The bank had been warned after an inspection by regulators in 2004 to tighten its anti-money laundering practices in the era of cyber crime.
Reader’s Digest said its filing will come in the form of a Chapter 11 pre-pack and that a majority of senior lenders already had approved the plan. Reader’s Digest said it elected not to make a $27 million interest payment due yesterday, but will emerge from the filing swiftly, having pared its debt from $2.2 billion to $550 million with the cooperation of lenders.
“This agreement in principle with our lenders follows months of intensive strategic review of our balance-sheet issues to financially strengthen the company,” said Mary Berner, president and chief executive officer of the Reader’s Digest Association.
After the company emerges from protection, it will be owned by senior lenders.
Reader’s Digest now joins a long list of print publishers battered by circulation and advertising declines as the public’s appetite shifts from turning pages to clicking on a mouse for news and entertainment.
Most Americans — and readers from all parts of the world — are familiar with the Reader’s Digest approach of condensing features and publishing staples such as “Life in These United States,” “All in a Day’s Work,” “Humor in Uniform,” “Quotable Quotes” and “Laughter Is The Best Medicine.”
The company recently slashed payroll by 8 percent, but ad pages and circulation continued to decline even as the magazine was reducing costs.
Despite the recession and unprecedented financial challenges, no prominent media brands and print titles have ventured into autosurf waters to boost revenues to save themselves or avoid a trip to bankruptcy court.
Even though self-styled “professionals” who run surf sites insist is it possible to generate tens of millions of dollars of legitimate “advertising” sales practically overnight by installing a surf script and promising “advertisers” they’ll receive back all of their money and emerge with a profit by clicking on “ads,” legitimate companies won’t involve themselves in such schemes.
Media companies with famous brands and enviable web traffic could crush amateur competitors by installing surf scripts and showcasing awards they’ve received from advertising and journalism societies — and even produce a roster of Pulitzer winners to woo prospects — but have chosen not to do so.
It’s because business ethics actually exist — and it’s because they aren’t willing to lie to readers and advertisers or involve them in wink-nod ventures and Ponzi schemes.
Not even to save themselves or to avoid a date with a bankruptcy judge.
Federal prosecutors seized more than $65 million from Florida-based AdSurfDaily last year, a self-described professional advertising company operated by Andy Bowdoin.
Prosecutors said ASD was engaging in wire fraud and money-laundering while operating a massive Ponzi scheme. Virtual Money Inc., a company that once provided debit cards for ASD, has been indicted on charges of helping a Colombian drug operation launder money in Medellin.
The news means that some ASD members were using the same cards Colombian drug lords allegedly were using to launder money at ATMs in Medellin.
