Creditors of insolvent newspaper chain Metroland Media Group Ltd. voted to approve a proposal on Monday that would see the company pay pennies on the dollar to restructure its debt and avoid bankruptcy.
Metroland filed for creditor protection on Sept. 15 with liabilities totalling more than $78-million. The publisher laid off 605 employees, nearly two-thirds of its work force, without paying severance or termination pay, while other employees who took voluntary buyout packages earlier this year had their salary continuance payments cut off.
The company, which is owned by Nordstar Capital LP, operated more than 70 community news outlets, but has since shut down all of its weekly print publications and now only maintains regional websites. It still publishes six daily newspapers, including The Hamilton Spectator. Metroland also said in September that it would shut down its flyer distribution business.
A restructuring proposal like the one filed by Metroland allows a troubled company to address its debt and avoid a bankruptcy filing. Had creditors voted against Metroland’s proposal, the company would have been deemed bankrupt under the Bankruptcy and Insolvency Act.
Trustee Grant Thornton LLP previously endorsed Metroland’s proposal, which still requires court approval, saying that a bankruptcy would likely result in no material recoveries for creditors.
“There are still remaining steps that must take place prior to implementation, but we are hopeful that Metroland will soon emerge from these proceedings into the next chapter of the business, allowing it to continue providing crucial journalism to communities across Ontario,” said Bob Hepburn, a spokesperson for Metroland.
“The union is extremely disappointed that our members will only recoup a fraction of what they are owed in severance,” said Carleen Finch, president of Unifor Local 87-M, which represents Metroland workers.
Andrew Hatnay, a partner with Koskie Minsky LLP, which represents terminated non-union employees, said the proposal is the “best overall result” for those who have been laid off.
The amount to be paid to creditors is not finalized. Metroland intends to apply to the federal government’s Wage Earner Protection Program, which offers payment to former employees stemming from a bankruptcy or receivership. If WEPP is approved, former employees will receive 17 cents on the dollar for the balance of their claims, in addition to other payments. Other unsecured creditors would receive the same repayment percentage.
If the application is turned down, former employees and other creditors will receive five cents on the dollar for the balance.
Lawyers for Metroland scheduled a court date to seek WEPP in late November, but the Department of Justice indicated it would oppose the motion. Metroland is still an operating company, and not in bankruptcy. The company then arranged to have a receiver appointed over its inventory, which could aid in its WEPP application.
“We believe that the likelihood of WEPP being eligible for this company is likely enhanced by virtue of that receivership,” Grant Thornton partner Jonathan Krieger said at the creditor meeting on Monday.
Newspaper publisher Metroland offers creditors 13 cents on the dollar for $70-million debt
Metroland’s largest creditor is Toronto Star publisher Torstar, which is also owned by Nordstar. Documents filed when Metroland made its proposal show the company owes $41.6-million to Torstar and $16-million to terminated employees. Torstar, as an affiliate of Metroland, did not vote on the proposal Monday and did not make a claim on its debt.
Unifor is challenging a debt payment the company made during a contentious split between Metroland’s former joint owners. Jordan Bitove and Paul Rivett formed Nordstar to purchase Torstar in 2020 for $60-million. To fund the deal, the pair borrowed $55-million from Canso Investment Counsel, a Richmond Hill, Ont.-based fund.
Mr. Bitove and Mr. Rivett fell out over the direction of the company and agreed to an arbitration process last year to split up Nordstar’s assets, with Mr. Bitove eventually assuming full ownership of the Toronto Star and Metroland. During the negotiations, the arbitrator ordered Metroland to sell its sole real estate asset to repay Canso. The proceeds of the sale amounted to $27-million, according to the trustee’s report.
A law firm representing Unifor filed a notice of motion in court seeking an order allowing it to pursue recovery of those funds. The motion, dated Dec. 10, claims that Metroland was not a party to the Canso debt and “had no legal obligation to make any payments.”
Metroland cited the challenging economic environment for newspapers – particularly the steep decline in print advertising revenue – for its financial troubles. The company’s papers have faced a “sizable loss of readership” and revenue has fallen more than 10 per cent each year for the past three years, according to Grant Thornton, while costs have remained constant.
“Metroland was losing money, and although we’ve been working furiously to find a solution, we hit a point where we simply couldn’t pay our expenses,” Torstar chief executive officer Neil Oliver said at a creditor meeting held in November. “While Metroland is not out of the woods with the proposal, we believe it gives the remaining team and properties the opportunity to be viable for the long term.”
Joe Castaldo