Bankruptcy time for Reader's Digest

Add Reader's Digest Association to the list of media companies that are going to need a detour through bankruptcy to make it through the recession.

The Pleasantville, N.Y.-based publisher is embarking on a Chapter 11 restructuring process that will allow it to convert some $1.6 billion in debt into equity. RDA says the pre-packaged bankruptcy plan (which only affects its U.S. division, not its international operations) will allow it to continue paying its suppliers and vendors while shrinking its debt load to a far more manageable $550 million*. The company says it will forego a $27 million interest payment due today, taking advantage of a 30-day grace period to hold discussions with its lenders.