On Friday (4 January) the company, which was bought out of administration by private equity group Better Capital in 2010, ceased all trading of its CD, DVD and bookselling arm although it confirmed that existing orders would be honoured.

Meanwhile Better Capital has filed a proposal to place RD UK's direct marketing division into a Company Voluntary Arrangement (CVA) while it focuses on a restructure. A CVA is a legal agreement between a limited company and its creditors that sets out arrangements for the repayment or writing off of its debts.

All of the direct marketing activity for US-based Reader’s Digest Association (RDA), of which RD UK was formerly a subsidiary, is managed by UK-based print management firm Williams Lea as part of a landmark $1bn contract, secured in 2007, to handle print procurement for the US publishing giant.

RD UK fell into administration in February 2010 after RDA, which was under Chapter 11 bankruptcy protection, rejected proposals to support the UK arm’s £125m pension fund deficit.
    
Better Capital, which has pumped £23m into RD UK since completing the acquisition in April 2010, said that the restructure would focus on its magazine publication.

A spokesman for Better Capital told PrintWeek that the substantial investment it had made thus far had enabled new products to be developed which were "showing considerable promise".

He added: "However, adequate returns across the business as a whole are not being achieved because of the rapid decline in RD’s traditional markets.

"Despite early success in achieving improvements in the business’ performance and profitability, it is now clear that structural changes to RD’s core market of CDs, DVDs and books mean that there is no achievable route to the longer term commercial viability of this part of the business."

The company said that the CVA was expected to take several weeks to conclude and if successful a smaller business "based largely around the magazine" would continue to trade.