Reader’s Digest and friends are in serious pain.

Today, the Reader's Digest Association said that it plans to file for Chapter 11 bankruptcy. Back in March, TBM's Dave Jamieson and Jeff Horwitz revealed the publishing company's financial troubles.

Even in Pleasantville, the news gets bleaker by the quarter. Back in the fall, the Reader's Digest Association, the publishing and direct-marketing behemoth based in the Westchester County hamlet, posted an operating loss of $337 million for fiscal 2008. After a steady stream of credit-rating downgrades, Moody's placed the company on "The Bottom Rung"—its list of companies most likely to default on their debt. And earlier this month, Bloomberg reported that RDA had retained Kirkland & Ellis' bankruptcy practice to "explore" restructuring options, including bankruptcy.

President and CEO Mary Berner, who's been at RDA's helm ever since the company's leveraged buyout two years ago, tossed a bucket of cold water on the bankruptcy rumors. In a memo to the media, she wrote that the company was moving forward with a hard-times "Recession Plan" but promised that any bankruptcy talk was balderdash. "We continue to meet our debt covenants," she soothed, "and in no way are we in default under our financing arrangements."

That's probably temporary. Under the terms of its loans, the company must meet progressively more stringent conditions to demonstrate its ability to pay down debt, with one hurdle in June and another a year later. With revenue falling, the owners of Reader's Digest have a strong shot at meeting their June number through wrenching budget cuts. But even from a distance, 2010 isn't looking good: Despite aggressively reducing its costs, the company's debt has recently traded as low as 7.5 cents on the dollar.

"The noose is tightening," says Moody's media analyst John Puchalla.

For years, RDA was known to be a foundering operation. In 2007, when the company was sold for $2.4 billion to a group led by Ripplewood Holdings LLC—a private-equity firm best known for its turnaround of Japan's Shinsei Bank earlier in the decade—that foundering operation became saddled with enormous debt. Its tab with creditors has now reached its highest level ever, a princely $2.1 billion. Last year, the company's interest payments alone were $160 million.