rda.pngReader’s Digest Association announced a plan today to restructure its $2.2 billion in debt through a pre-packaged Chapter 11 filing.

The company said it had reached an agreement with a majority of its lenders, which include JP Morgan, Ares Capital and GE Capital, that would reduce its debt to $550 million. RDA plans to file for Chapter 11 bankruptcy protection within the next 30 days, using the 30-day grace period to put avoid making a $27 million interest payment on senior subordinated debt due today.

Company spokesman William Adler said the Reader’s Digest publisher would be using the next few days to get more lenders on board with the plan, although a majority have already agreed to it in principle. Once the debt is decreased, Adler said he had faith that the company would be able to turn a profit and grow.

“The business generates a lot of cash, just not enough to pay off our debt,” Adler said, revealing that RDA brings in $130 million in cash per year but has $145 million in debt. “We want to bring our debt to a level that we could comfortably cover.”

In a statement, CEO Mary Berner said the company will continue to operate as normal throughout the restructuring process. “Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives,” she said.

RDA’s full release after the jump

Read more