Reader’s Digest postpones exit from bankruptcy plan

Reader’s Digest Association (RDA) yesterday said it would delay its emergence from bankruptcy after the UK pension regulator said it would not approve a pension fund agreement related to the US publisher’s British subsidiary.

Reader’s Digest Association Ltd, the British entity, had reached an agreement with the trustees of its pension plan and the Pension Protection Fund to resolve its pension fund deficit. The agreement was contingent on approval from
Britain’s pensions regulator, which said it will not approve the pension application.

“RDA has elected to temporarily delay its emergence from Chapter 11 to address an issue involving the pension programme,” the company said in a statement. “RDA expects to emerge within the next few weeks.”

RDA UK is required to pay $7.4m (£4.6m) in pension obligations annually, but did not generate enough free cash flow to make the payments, Reader’s Digest said in court documents. To help avoid a liquidation of the British unit,

RDA proposed a payment of about $17.6m and agreed to issue 33 per cent of the equity of its British entity, subject to a five-year call-back option to buy the equity for $3m.