• Bloomberg, Thursday, March 5, 2009 10 AM

Reader's Digest Association has hired law firm Kirkland & Ellis to explore restructuring options including a possible bankruptcy filing, says an insider. The law firm was asked to evaluate options for the publisher that include a possible "pre-packaged" or "pre-arranged bankruptcy," in which much of the restructuring work is completed out of court.

The company's restructuring could take a number of different forms: "an out-of-court restructuring, an in-court restructuring, or a debt buyback," says Moody analyst John Puchalla. Moody's said in a credit opinion Feb. 18 that Reader's Digest's capital structure appears "unsustainable" and may violate its covenants or restructure within the next year to 18 months.

RDA, which publishes 92 magazines, operates 65 Web sites and sells millions of books, music and video products, was bought for $2.4 billion in March 2007. Buyers were a group of investors led by Ripplewood Holdings LLC, and merged with WRC Media and Direct Holdings U.S. Corp.

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