• by Erik Sass  @eriksass1, March 26, 2013

RDA Holding Co., which owns The Reader’s Digest Association, has received approval for a key part of its bankruptcy reorganization: the U.S. Bankruptcy Court for the Southern District of New York has approved a plan that will raise $105 million to fund ongoing operations as part of a “debtor-in-possession” financing agreement.

Along with the financing agreement, the court also granted approval to measures to help RDA continue its business operations, including authority to pay employees and freelancers on normal schedules.

The company filed its reorganization plan and disclosure statement on Thursday, March 21, and is due back in court April 25 for a hearing to consider approval of the disclosure statement.

RDA filed for bankruptcy protection in February -- its second Chapter 11 filing in four years. At the time, the company said it had already obtained the consent of over 70% of its secured note-holders to convert approximately $465 million of debt into equity in the company, thus giving creditors a stake in the company in exchange for wiping out debt.

The court process, which RDA expects to take less than six months, will restructure its U.S. organization and reduce overall debt by around 80%, leaving it with $100 million in debt when it exits bankruptcy protection.

RDA previously entered Chapter 11 bankruptcy protection in August 2009, seeking to reduce its debt from about $2.2 billion to about $550 million through negotiations with creditors. Much of that debt had been assumed as part of a $2.8 billion deal to take the company private, engineered by Ripplewood Holdings, LLC.