Source Interlink Files for Bankruptcy, Will Privatize

Source Interlink Cos., the publisher of Soap Opera Digest and Soap Opera Weekly magazines controlled by billionaire Ron Burkle’s Yucaipa Cos., sought bankruptcy protection as it moves to become a private company.

The company, which also distributes newspapers and other publications, listed debt of $1.9 billion and assets of $2.4 billion as of April 24 in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.

Source Interlink publishes 75 magazines, mostly about cars and motorcycles, putting it at the nexus of two struggling industries. U.S. magazine advertising revenue in the first quarter fell 20 percent from a year earlier, according to the Publisher’s Information Bureau, an industry group. U.S. auto sales tumbled 37 percent in March. Source Interlink hasn’t reported a profit since the second quarter of 2007.

“This restructuring will materially reduce our interest expense and debt levels,” Source Interlink Chief Executive Officer Greg Mays said today in a statement. The Bonita Springs, Florida-based company also runs Web sites and distributes CDs, video games and DVDs in the U.S.

Under an agreement with its lenders, about $1 billion of existing debt will be canceled and about $100 million additional liquidity will be provided, the company said. Source Interlink said a lender-approved plan of reorganization will be filed.

At this point there is no immediate impact to Digest and Weekly which will continue to conduct "business as usual" per Lynn Leahey.