Reader’s Digest UK has been placed into administration by its board, placing 117 UK jobs at risk, after it failed to reach agreement with the pension regulator on a plan to settle its fund deficit.
Reader’s Digest Association, the US parent company of the 72-year-old pocket-sized magazine, issued a statement today confirming recent speculation that its UK title was unable to meet financial obligations and therefore would not be able to sustain its operations.
Administrators Moore Stephens confirmed they were seeking a buyer for the title.
RDA placed the blame firmly with the pension’s regulator, saying it “would not support an agreement already reached between RDA UK, the trustees of its pension plan and the UK Pension Protection Fund (PPF) to settle a longstanding pension plan liability.”
Earlier this month it emerged that the UK pension regulator had decided not to sign-off on RDA’s plan to inject £10.9 million into the pension fund plus one third of the UK business as a guarantee against future liabilities.
The need to plug the £125m pension gap emerged when the US business filed for “Chapter 11” bankruptcy protection in August 2009 to reduce its total debt, reported to be around $2.2bn (£1.4bn).
Reader’s Digest is the world’s largest-selling circulation magazine with 50 editions sold worldwide.
Parent company RDA, which has offices in 44 countries, said despite its UK title having audited sales averaging 465,028 each month in the second half of last year without the planned restructure it “did not see a clear pathway to profitability in the UK over the next several years”.
RDA warned two weeks ago that if it could not reach a deal then it would have no choice but to file for administration for the UK operation, which employs 117 people in London and Swindon.
A statement from RDA today said: “The agreement, which contemplated a lump sum payment by parent company RDA plus an equity stake in RDA UK, was authorised by the US Bankruptcy Judge overseeing RDA’s US Chapter 11 proceedings, and would have relieved RDA UK of significant financial obligations associated with its under-funded UK pension plan.
“Absent [of] an agreement, RDA UK is financially unable to meet those obligations and sustain its operations.”
The statement added: “In light of the recent action taken by RDA UK to file for administration, parent RDA expects to emerge from Chapter 11 promptly.”