Reader's Digest: a $2.4bn LBO ended in two bankruptcies and a video-era rebirth

In November 2006 a consortium led by Ripplewood Holdings agreed to take the Reader's Digest Association private at $17 a share, a $2.4 billion deal with only $375 million of equity, $275 million of it from Ripplewood. The deal loaded roughly $2.1 billion of debt onto an 87-year-old magazine just as its business collapsed underneath it. US circulation fell 14 percent in a year to 8.31 million, in January 2009 it cut 8 percent of its 3,500 jobs and imposed unpaid leave. In May 2009 it hired restructuring lawyers; in August it delayed a $27 million interest payment on its 9 percent notes.

The first decision was a prepackaged Chapter 11 in August 2009, designed to cut the debt by about 75 percent and move Ripplewood aside: when the company emerged in 2010, its lenders owned it. That proved to be only half the job. With revenue still shrinking, RDA Holding filed again in February 2013, shrinking a $465 million debt load to about $100 million — an 80 percent reduction. Twice the creditors chose continuation over liquidation, because the brands were worth more publishing than dismantled.

The second decision was strategic. In 2014 the company brought back a veteran, Bonnie Kintzer, as chief executive, and in 2015 it dropped the Reader's Digest name, rebranding as Trusted Media Brands to cover Taste of Home, The Family Handyman and Reader's Digest across digital, video and social. The destination came in August 2021: the hedge-fund-backed, twice-bankrupt publisher bought Jukin Media — the video library behind FailArmy and the 'Pizza Rat' clip, reaching over 220 million people online — in a deal Forbes valued above $100 million, adding nearly 300 staff to Trusted Media's 400.

Debt cut from $2.1bn to $100m by 2013; by 2021 the renamed Trusted Media Brands had roughly 400 staff and paid over $100m for video company Jukin Media

The 2007 buyout layered $2.1 billion of debt on a magazine whose US circulation was already falling 14 percent a year, so fixed interest consumed the cash the titles generated.

Prepackaged Chapter 11 let the company cut debt about 75 percent in weeks rather than years, keeping Reader's Digest and its sister titles publishing throughout.

Creditors funded the second restructuring because the brands' audiences made them worth more as going concerns than in a liquidation.

Renaming the company in 2015 detached strategy from the sinking flagship identity and licensed investment in food, DIY and video platforms.

The near-zero debt left after 2013 created the balance-sheet room to buy Jukin in 2021 and convert a print publisher into a video business.

An LBO of a declining cash cow moves the decline onto the balance sheet. Let bankruptcy arbitrate the debt, cut it to what the brands can carry, and spend the savings on the next medium.

Trusted Media Brands integrated Jukin's roughly 300 staff, keeping the FailArmy, People Are Awesome and Pet Collective properties alongside Taste of Home and The Family Handyman. Reader's Digest itself kept publishing — the restructurings saved the brand, not the buyout — but the corporate center of gravity had moved decisively to video licensing and digital reach. The recovery belonged to the lenders who twice traded claims for equity and to a management team that stopped treating the magazine as the business.