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RDA Holding Co., publisher of the 91-year-old Reader’s Digest magazine, filed for bankruptcy to cut $465 million in debt and focus on North American operations as consumers shift from print to electronic media, Bloomberg News reported today. Reader’s Digest, founded by DeWitt and Lila Wallace, went public in 1990. An investor group led by private-equity firm Ripplewood Holdings LLC bought it in 2007 for $1.6 billion and the assumption of about $800 million in debt. The company also filed for bankruptcy in August 2009, citing a drop in advertising spending and the debt load incurred in its acquisition. The company listed assets and debt of more than $1 billion each in chapter 11 documents filed yesterday. Under a restructuring agreement supported by Wells Fargo & Co., $465 million of remaining senior notes will all convert to equity. The company expects to have about $100 million in debt when it exits chapter 11, about an 80 percent reduction.

Capitol Bancorp Ltd. is seeking to shore up its Sunrise Bank of Albuquerque with a $1 million payment to prevent the bank from being seized by regulators, Dow Jones DBR Small Cap reported today. The Michigan bank-holding company Friday requested court permission to enter into a loan deal, stressing that if it is not allowed to access the funds and the bank is seized, there will be serious financial harm to its subsidiary banks.

The U.S. Trustee Program reached settlements with Capstone Advisory Group LLC and Kaye Scholer LLP in the bankruptcy case of GSC Group, Inc., according to USTP press releases last week. Both settlements are to resolve that both firms failed to make accurate and complete disclosures in the GSC Group bankruptcy. Under the proposed Capstone settlement, the financial adviser will pay $1 million, waive an additional success fee of $2.75 million, adopt policies and procedures approved by an independent monitor to ensure accurate and complete disclosure, including with respect to employment of contractors and conflicts of interest and undergo compliance reviews by the monitor for two years. The proposed Kaye Scholer LLP settlement will have the law firm paying $1.5 million, adopt policies and procedures approved by an independent expert to ensure the accuracy and completeness of disclosure, including checks for conflicts of interest and assurance that attorneys review documents filed in their name, establish a special compliance review committee to certify under penalty of perjury the law firm’s continuing compliance and provide training to its attorneys and other staff to ensure the accuracy and completeness of documents it files in bankruptcy court. The case is In re GSC Group Inc., U.S. Bankruptcy Court, Southern District of New York, No. 10-14653.

Mid America Brick & Structural Clay Products LLC filed for chapter 11 protection on Friday, the St. Louis Business Journal reported today. Company officials said that the depression of the U.S. housing market and over-capacity in the brick industry prevented it from meeting sales and profitability projections. Mid America Brick intends to reorganize and has obtained debtor-in-possession financing from a consortium led by an affiliate of Advantage Capital Partners, a St. Louis venture capital and small business finance firm. The Mexico, Mo.-based business has 50 to 99 creditors, estimated assets of $1 million to $10 million and estimated liabilities of $10 million to $50 million, according to the bankruptcy filing.

Liberty Medical Supply Inc. and affiliates that provide products and services for people with diabetes and other ailments filed for chapter 11 protection amid pressure from creditors, Bloomberg News reported on Friday. The Port St. Lucie, Fla.-based company listed assets and debts of as much as $500 million each in court papers filed on Friday. Among the largest unsecured creditors listed in court papers were CGS Administrators of Nashville, Tenn., owed $137 million, and Abbott Laboratories of Abbott Park, Ill., owed more than $5 million. The case is In re Liberty Medical Supply Inc., 13-10268, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Ally Financial Inc. mortgage subsidiary Residential Capital wants more time to exclusively file a chapter 11 reorganization plan as it faces resistance from various creditors, Dow Jones Newswires reported yesterday. In a court filing yesterday, ResCap asked a judge to extend its exclusivity period through May 29 from a current expiration of Feb. 28. ResCap's exclusivity period has been extended twice before. Ally has proposed paying ResCap's estate $750 million to settle third-party claims, though creditors say that amount is too small. ResCap is in mediation with creditors and Ally to try to reach a consensual deal, though ResCap this week filed a motion to appoint a seasoned bankruptcy attorney as its chief restructuring officer to help further progress on this front.

Energy Future Holdings has enough money to pay its debts for at least the next year, but lawyers and bankers are betting that a big chunk of the Texas power company will file for bankruptcy, and are already trying to line up clients to represent in the event of a restructuring, Reuters reported today. Energy Future—formerly TXU—set the wheels in motion last week when it tapped restructuring advisers from law firm Kirkland & Ellis and financial advisers Evercore Partners and the Blackstone Group. The hiring of advisers comes just months before the company, which was taken private in 2007 in the largest leveraged buyout, must start making payments on some of the $52 billion of debt it had as of the end of September. Now, creditors have begun to organize themselves for a restructuring and a plethora of large law firms are involved or making pitches to represent creditor groups, including Cadwalader Wickersham & Taft, Brown Rudnick, Otterbourg Steindler Houston & Rosen, and White & Case.

A bankruptcy judge has cleared California stereo-equipment maker AuraSound Inc. to auction its assets, with GGEC America Inc., a subsidiary of the company's biggest creditor and main primary supplier, kicking off bidding with a $4.8 million offer, Dow Jones DBR Small Cap reported today. Bankruptcy Judge Mark S. Wallace on Wednesday said that AuraSound can auction the assets, including the exclusive, royalty-free license to use AuraSound’s trademarks and all of the assets related to the operation of AuraSound’s Hitachi, Vizio and NRT lines of business, on March 1.

A Fitch Ratings analysis of corporate bankruptcies released yesterday found that fundamental estimates of reorganization enterprise value or negotiated settlement values used in bankruptcy reorganization plans are critical to the success of an issuer's reorganization process, Reuters reported yesterday. On average, the 75 defaulted issuers in Fitch's sample eliminated 68 percent of pre-petition debt through their bankruptcy processes, with debt reduction in 73 of 75 cases. Fifteen companies emerged with no debt outstanding due to being completely liquidated or emerging as going concerns with no debt. Relative position in the capital structure was also a key determinant of recovery. First-lien creditors fared much better than junior creditors in terms of ultimate recoveries: 54 percent of the 99 secured claims (all priorities) received plan distributions that resulted in recoveries of at least 91 percent of the claim amounts. Creditor recoveries on unsecured debt were more widely distributed: 43 percent of the 71 unsecured issues received distributions of 10 percent or less of their claim amount and 16 percent recovered at least 91 percent. Read more: http://www.reuters.com/article/2013/02/14/idUSWNB0035C20130214

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Lehman Brothers Holdings Inc. is seeking to question Bruno Iksil, the former JPMorgan Chase & Co. trader known as the London Whale, about losses Lehman says spurred unnecessary collateral calls that helped force it into bankruptcy, Bloomberg News reported yesterday. JPMorgan in May disclosed billions of dollars in losses by London-based Iksil, who got his nickname because his positions were so big. Lehman, which has been fighting JPMorgan over $8.6 billion since 2008, said in a court filing yesterday that Iksil may have knowledge of the role JPMorgan's chief investment office played in managing exposure to Lehman. Lehman, which is gathering money to pay creditors an average of 18 cents on the dollar, said that it realized Iksil could help it after JPMorgan disclosed "risk management failures." Iksil was "central" to a dispute with JPMorgan over valuing derivatives, New York-based Lehman said.