I was shocked to find out that Reader’s Digest Association Inc, publisher of the magazine that claims the largest paid circulation in the U.S., has filed for bankruptcy protection with a plan to reduce $2.2 billion in debt by 75 percent.

Holders of more than 80% of the company’s senior secured debt will be affected. The publishing company apparently has defiantly suffered from the financial downturn. It cited decreased consumer and advertising spending, along with a highly leveraged debt structure, as reasons for the bankruptcy filing.

I found out that under the proposed scheme, which needs approval by the bankruptcy court, lenders will swap $1.6 billion in debt for almost all of Reader’s Digest’s equity, with 7.5% of equity reserved for management and new directors. Oh my!

It seems that the economic crash is affecting everything.  I really hope this famous institution survives in such a volatile time. Do you think it will be affected?