Readers Digest UK edges closer to bankruptcy over pension fund deficit

Reader's Digest Association (RDA), the publisher of the venerable monthly household journal the Reader's Digest magazine, co-founded in 1922 by Lila Bell Wallace and DeWitt Wallace, which is under bankruptcy protection, may have to wind up its UK arm because of a massive deficit in its UK pension fund.

The Pleasantville, New York-based media company said in a statement yesterday that it reviewing its options in the UK after the UK Pensions Regulator refused to approve an agreement arrived last month with the trustees of its longstanding deficit pension plan and the UK Pension Protection Fund (PPF).

RDA, which was to choose its date for emerging from Chapter 11 after its restructuring plan after going into protection on 15 January 2010, said that it will now temporarily delay the procedure to address the UK pension plan issue.

Readers Digest UK, which employs 135 people in the country and 1,600 members on its pension fund, has a pension deficit of £125 million.

RDA said in the statement, ''If a deal cannot be agreed between RDA Inc and the Pensions Regulator, RDA Inc will not be able to continue its support for the UK company. If that is the case, the directors of the UK business will have no choice but to file for administration.''

RDA is the world's largest-circulation magazine, and has 94 magazines, including 50 editions of Reader's Digest, operates 65 branded website and sells approximately 40 million books, music and video products across the world, filed for file for pre-arranged bankruptcy protection in August after it reached agreement on a debt-for-equity restructuring with a majority of its secured lenders. (See: Reader's Digest to file for bankruptcy protection)