UK/US - The Reader's Digest Association said The Pensions Regulator will not approve a rescue plan for its pension scheme, throwing the future of its UK business into jeopardy.
RDA said it had temporarily delayed its emergence from US chapter 11 bankruptcy proceedings as a result.
The US firm said it came to an agreement with the trustees of its UK pension plan and the Pension Protection Fund last month to resolve the company's scheme deficit - an deal which depended on approval from The Pensions Regulator.
It said under the terms of the agreement, The Reader's Digest Association would have made a payment of approximately £10.9m (US$17.4m) and transfer a one third interest in the equity of RDA UK to the trustees. The scheme would then have transferred to the PPF.
However, RDA said the regulator has now indicated it will not approve the application.
In a statement, RDA said: "In light of this unusual and unexpected development, The Reader's Digest Association has filed a Motion in the US Court in which it notes that unless the pension deficit issue is resolved it will no longer be able to support the UK business indefinitely and therefore, the UK business may need to file for administration."
The Pensions Regulator said it could not comment on individual cases.
The UK arm of RDA is now reviewing its options in an attempt to find a solution.
The RDA said this issue is specific to the UK entity and does not involve any other RDA company.
It added the RDA's restructuring plan was confirmed by the US Bankruptcy Court for the Southern District of New York on January 15, enabling the company to choose its date for emergence. RDA said it expects to emerge from these proceedings within the next few weeks.
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