Another example of a private equity screw-up. Readers Digest, the media outlet that started in 1922 and made its name publishing condensed novels and edited articles from other magazines has filed for Chapter 11 bankruptcy protection. The latest bone-headed plan is to convert $1.6 billion worth of debt into equity. How feasible is that when the magazine's readership is dying off and young people are refusing to subscribe?

That's a big bet by the banks and it's full of risk. If revenues stay where they are, and debt servicing is wound back, then that might work. But if revenues fall, it will get ugly and with advertising falling away, it's hard to see revenues increasing. Heads will roll at the banks.

This is testimony to the greed and short-sightedness of private equity operators. Back in 2006, Readers Digest was sold to private equity firm Ripplewood Holdings for $2.4 billion which, as part of the deal, took on $800 million worth of debt. The latest fiasco confirms what many had long suspected - the deal was badly thought through and over-leveraged. As the Blogging Buyouts site says, it's another botched private equity deal made at a time when money was cheap and credit was easy. Ripplewood took on massive debt when advertising was struggling to maintain its historical growth.

With such stupidity, it does make you wonder why private equity operators still collect such enormous fees and salaries.