• by Erik Sass  @eriksass1, November 1, 2010

After several years dodging the bankruptcy bullet, American Media Inc -- which publishes the National Enquirer, Star, Shape and Men's Fitness, among other titles -- revealed Monday that it is preparing to enter Chapter 11 bankruptcy protection. It has already agreed on terms with a majority of its bondholders.

Under the terms of this "prepackaged" bankruptcy, it will enter Chapter 11 protection two weeks from now and exit Chapter 11 protection no more than 60 days later. During this time, creditors will take ownership of the company in exchange for debt forgiveness. In an official statement, the company said this plan has the support of roughly 80% of its unsecured bondholders.

The announcement also signals the end of AMI's earlier offer to exchange debt in the form of senior notes, due in 2013, for cash and equity with any creditors that were willing. AMI was evidently unable to swap enough debt to forestall bankruptcy, despite extending the deadline on several occasions.

According to AMI Chairman, President and CEO David Pecker: "Publications will function seamlessly, staff will be unaffected by the reorganization and customers should not notice any difference during the 60 day process."

Like other magazine publishers, AMI has taken its knocks during the recent economic downturn.

From 2007-2009, according to the Publishers Information Bureau, ad pages declined 9% at the National Enquirer, from 903 to 824; 17% at Shape, from 1,548 to 1,281; and 25% at Men's Fitness, from 913 to 682.

However, these titles seem to have stabilized somewhat in 2010, with the National Enquirer down 2.7% in the first nine months of the year, while Men's Fitness is down 6.7% and Shape is down 3.6%, also according to PIB.