Reader's Digest UK in administration

Publishing company Reader's Digest, famed for its magazine of the same name, has gone into administration in the UK, putting 117 jobs at risk.

The decision comes after talks between the company's US parent group and the UK Pensions Regulator broke down.

The dispute centred on how to pay down a £125m deficit in its UK pension fund.

Administrators said the UK magazine, which has more than 540,000 subscribers and was founded in 1938, would continue to trade while a buyer was sought.

Reader's Digest had agreed a deal with the Pension Protection Fund to pay off a small part of the deficit, but the regulator vetoed the agreement.

As a deal could not be done, the UK publisher said it would not be able to meet its pension obligations and so could not sustain operations.

Prize draws

The first edition of Reader's Digest was published in the US in 1922.

Having begun as a collection of condensed articles, it started to include original content and is now mostly made up of specially commissioned pieces.

More recently it became known for its prize draws. The administrators said last week's draw took place as scheduled, with the prize fund kept in a trust, but arrangements for future draws were to be reviewed.

The magazine also became associated with free gifts - from pens and alarm clock radios to encyclopaedias - as it looked to lure new readers.

However, Reader's Digest has failed to shake off its image as a publication favoured by older people and in dentists' and doctors' waiting rooms.

Despite attempts to modernise, including launching an online edition, its readership in the UK has fallen dramatically from about two million in the 1990s.

The company says Reader's Digest is the largest-selling subscription magazine in the world. The group also sells books, other magazines, recorded music and home videos.

Cash flow

The pensions crisis is just the latest problem to hit the publisher.

The US parent group, Reader's Digest Association (RDA), filed for Chapter 11 bankruptcy protection last year after struggling with interest payments on a $2.2bn (£1.4bn) debt. It now expects to come out of Chapter 11 shortly.

The UK arm had experienced a cash flow problem for some time, a company spokesman said, and this had been exacerbated by higher-than-normal contributions to the severely underfunded pension fund.

Its more than 100 UK employees are employed in Swindon and Canary Wharf.

Posted at 09:00PM Feb 17, 2010 by Kelly Board in Insolvency  |  Comments[0]