Reader's Digest enters administration

By Simon Hayes on February 17, 2010 2:58 PM |

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It might be the most widely read magazine in the world but that has not stopped the UK arm of Reader's Digest going into administration.

The publisher, based in Westferry Circus, filed for administration today after a deal to save its pension fund collapsed, putting around 135 jobs at risk.

Readers Digest UK, which has sites in Canary Wharf and Swindon, but has been in trouble for some time, mainly because of a large deficit in its pension fund.

Its parent company, Reader's Digest Association (RDA), claimed it was the actions of the UK Pensions Regulator which prompted the move into administration.

A shortfall in the pension fund was to have been met by the payment of a lump sum by the RDA after agreement was reached between the fund's trustees ad the Pension Protection Fund.

But the Pensions Regulator blocked the move.

An RDA spokesman said: "The decision by the RDA UK board to place the UK company into an orderly insolvency process follows the recent decision by the UK Pensions Regulator that 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.

"RDA does not expect the UK administration to have a material impact on its financial performance as the UK business has been operating with negative free cash flow, and without the contemplated restructuring the corporation did not see a clear pathway to profitability in the UK over the next several years."

RDA is itself about to emerge from Chapter 11 bankruptcy protection, the US equivalent of administration, after a successful financial restructuring, although it delayed the move until the UK pensions problem was resolved.