Reader's Digest United Kingdom to File for Administration; Reader's Digest Association to Emerge from Chapter 11
PLEASANTVILLE, N.Y., Feb. 17 /PRNewswire/ -- The Reader's Digest Association, Inc. ("RDA"), today announced that the Reader's Digest Association, Ltd. ("RDA UK"), a subsidiary of RDA, has filed an administration proceeding in the UK. 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.
The agreement, which contemplated a lump sum payment by parent company RDA plus an equity stake in RDA UK, was authorized by the US Bankruptcy Judge overseeing RDA's U.S. Chapter 11 proceedings, and would have relieved RDA UK of significant financial obligations associated with its underfunded UK pension plan. Absent an agreement, RDA UK is financially unable to meet those obligations and sustain its operations.
Parent company RDA has completed a restructuring plan after having filed for pre-arranged Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York on August 24, 2009. The court confirmed RDA's plan on January 15, 2010, enabling the parent company to emerge from Chapter 11. On February 1, RDA announced it had elected to temporarily delay emergence from Chapter 11 for a few weeks to allow additional time for the UK pension issue to be addressed. In light of the recent action taken by RDA UK to file for administration, parent RDA expects to emerge from Chapter 11 promptly.
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. The UK pension issue is specific to the UK entity and does not involve any other RDA company. RDA intends to work with the administrators to ensure an orderly process, and RDA does not expect an adverse impact on non-UK operations globally including suppliers and customers.
RDA is a global multi-brand media and marketing company that educates, entertains and connects audiences around the world. The company builds multi-platform communities based on branded content. With offices in 44 countries, it reaches a customer base of 130 million in 78 countries. It publishes 92 magazines, including 50 editions of Reader's Digest, the world's largest-selling circulation magazine, operates 78 branded websites and sells 40 million books, music and video products across the world each year. Further information about the company can be found at www.rda.com and specific information about the restructuring can be found at www.RDARestructuring.com.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and applicable federal securities laws that are based upon our current expectations and assumptions concerning future events, which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. The words "expect," "anticipate," "estimate," "forecast," "initiative," "objective," "plan," "goal," "project," "outlook," "priorities," "target," "intend," "evaluate," "pursue," "commence," "seek," "may," "would," "could," "should," "believe," "potential," "continue," or the negative of any of those words or similar expressions is intended to identify forward-looking statements. All statements contained in this press release, other than statements of historical fact, including, without limitation, statements about our plans, strategies, prospects and expectations regarding future events and our financial performance, are forward-looking statements that involve certain risks and uncertainties. While these statements represent RDA's current judgment on what the future may hold, and RDA believe these judgments are based upon reasonable assumptions, these statements are not guarantees of any events or financial results, and RDA's actual results may differ materially. Important factors that could cause our actual results to be materially different from our expectations include, among others, the risk that RDA is unsuccessful in its efforts to complete the remaining stages of its business restructuring, the risk that RDA continues to be subject to liquidity constraints, and the risk that the after-effects of the chapter 11 bankruptcy filing could have adverse impacts on RDA's ability to maintain contracts, trade credit and other customer and vendor relationships. Accordingly, you should not place undue reliance on the forward-looking statements contained in this press release. These forward-looking statements speak only as of the date on which the statements were made. RDA undertakes no obligation to update publicly or otherwise revise any forward-looking statements, except where expressly required by law.
SOURCE Reader's Digest Association