On Monday, Reader's Digest Assn. announced an agreement with its lenders to reduce the media corporation's debt from $2.2 billion to $550 million.

In November, I wrote about rumors that Reader's Digest was tackling a branding problem and considering changing its name. But the company apparently has bigger fish to fry on its balance sheet.

"This agreement in principle with our lenders follows months of intensive strategic review of our balance sheet issues to financially strengthen the company," RDA Chief Executive Officer Mary Berner said in a statement. "Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives." 

Incidentally, reports Foliomag.com, all of the members of the RDA's board of directors, except for Berner, have resigned.

The big hit comes to private equity firm Ripplewood Holdings, headquartered in New York City. The investment firm acquired RDA in 2007 for $1.6 billion, but now its investment is wiped out. Foliomag.com reports, "According to the agreement, RDA’s senior lenders—including Bank of America, JP Morgan and GE Capital—will exchange a “substantial portion” of the company’s $1.6 billion in senior secured debt for equity and provides a transfer of ownership of the company to the lender group.

However, the company seems optomistic about its future.

"In a statement, Berner said its voluntary pre-arranged Chapter 11 filing is 'the best type of bankruptcy to be in' and is 'strictly a balance-sheet issue' with no mass layoffs or salary cuts planned."