"This was the only way we saw to reach some kind of closure,'' Time Inc. President-CEO Don Logan said today following the voluntary bankruptcy filing by American Family Enterprises, Jersey City, N.J., the magazine subscription company and sweepstakes operator 50%-owned by Time Inc. "AFE has been under siege with lawsuits from numerous attorneys general, and it has meant that we've been operating the business with one arm tied behind our back,'' Mr. Logan said. The Oct. 29 filing is aimed at resolving AFE's pending litigation and strategically restructure its finances and operations. Time Inc. insiders said AFE's mounting legal liabilities and the fear that Time Inc. could by association become a target of lawsuits led to the Chapter 11 decision.
In a statement, AFE President Susan Caughman said AFE's business will continue as usual. AFE will conduct sweepstakes, and it promises publishers will still be paid remits--the fees magazine publishers collect on the subscriptions AFE sells for them. All prize money for AFE contests are pre-funded and held in trust.
During the reorganization, AFE will explore other ways for the company to sell subscriptions that do not involve sweepstakes, according to Mr. Logan. "We hope we can emerge from this period in a condition in which we can continue to operate and continue to be a meaningful source of subscriptions for the magazine industry,'' Mr. Logan said.
Copyright November 1999, Crain Communications Inc.