NEW YORK (Reuters Life!) - The U.S. units of media company Reader's Digest Association Inc filed for bankruptcy, marking a new chapter for the 87-year-old magazine as it carries out a plan to cut its debt and transfer ownership to a group of lenders.

The company, named for its general-interest magazine packed with family-friendly humor and inspirational stories, said earlier this month that it would file for bankruptcy to help cut a debt load of $2.2 billion by 75 percent.

Reader's Digest is the latest in a string of media companies hurt by an economic slowdown that has cut ad spending and hampered companies' abilities to repay debt.

Advertising is down, circulation is down, there are alternatives like the Internet where people are getting their information, said Richard Mikels, a partner with law firm Mintz Levin. It's a tougher industry than it used to be.

Reader's Digest, founded in 1922 and headquartered in Pleasantville, New York, does not plan to lay off any employees or sell any units in its restructuring.

The plan calls for Reader's Digest senior lenders to exchange a substantial portion of the company's $1.6 billion in senior secured debt for equity, transferring ownership to the lender group.

The restructuring plan must be approved by a bankruptcy judge.

One way to deleverage is by turning debt into equity. That will happen more and more throughout the economy over the next several years, said Mikels.

RESTRUCTURING

Private equity firm Ripplewood bought Reader's Digest in 2007. It will relinquish ownership to a steering committee led by JPMorgan Chase & Co and including Ares Management LLC, Eaton Vance, Regiment Capital and GE Capital, among others.

Reader's Digest is seeking new board members to replace Ripplewood members who stepped down as part of the reorganization.

Current management, including President and Chief Executive Officer Mary Berner, remain at the helm.

Over 80 percent of the senior lender group support this transaction and, with this support, the company intends to emerge expeditiously from Chapter 11, Chief Financial Officer Thomas Williams said in a court document.

Operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand are not part of the bankruptcy filing, the company said in a statement.

The company publishes 50 editions of Reader's Digest and 44 other magazines. Combined, its magazines reach more than 100 million readers worldwide, according to the company.

(Reporting by Chelsea Emery; Additional reporting by Bijoy Koyitty in Bangalore; editing by John Wallace)

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