Regional newspaper publisher Metroland Media Group Ltd. is offering to pay its unsecured creditors 13 cents on the dollar in an effort to keep from going bankrupt.
Legal documents show that the company’s readership and revenue have been dropping by more than 10 per cent each year for the past three years, while costs have remained constant. The company’s revenues had dropped 40 per cent between 2020 and 2022, but the company had not yet adjusted its cost structure, it said.
As of Sept. 15, the company owed $70.8-million in debt to unsecured creditors. Toronto Star publisher Torstar, the company’s largest creditor, is owed about $40-million.
Laid-off employees will also get 13 cents on the dollar for whatever they’re owed that is not covered by the government’s Wage Earner Protection Program (WEPP), according to Metroland’s restructuring proposal filed Tuesday night. As of this year, WEPP provides up to approximately $8,300 per employee for the payment of outstanding eligible wages when an employer becomes bankrupt.
In September, Metroland owner Nordstar Capital LP said it intended to put its regional newspaper business into bankruptcy protection, terminating 605 employees – two-thirds of its work force – and converting more than 70 of its weekly papers into digital-only publications. The cut includes 68 of Metroland’s 200 journalists, and 100 unionized members of Unifor Local 87-M.
Metroland operates local publications in many Ontario cities including Barrie, Dundas, Oakville, Perth and Renfrew.
The proposed payments are subject to votes from creditors on Nov. 14. Under the Bankruptcy and Insolvency Act, if creditors vote against the proposal, the company is deemed automatically bankrupt.
Making a proposal allows financially troubled companies to avoid bankruptcy by restructuring, and is typically less complicated and expensive than filing for bankruptcy through the Companies’ Creditors Arrangement Act.
In the event of a bankruptcy, former employees would get their full payment owed to them under WEPP but other unsecured creditors will recover approximately 5 cents on the dollar at most, according to the trustee report.
The trustee, Grant Thornton Limited, has recommended that the unsecured creditors accept the proposal. In its report, Grant Thornton said the company’s inventory, machinery and equipment have no liquidation value, and that extracting value from the company’s intellectual property would be a lengthy and expensive process. The company holds equity investments of $20-million but these likely have “no realizable value,” Grant Thornton said.
Andrew Hatnay, a lawyer from Koskie Minsky LLP representing the terminated non-union employees, said his team was reviewing the proposal. Unifor Local 87-M president Carleen Finch said she was “extremely disappointed” in the proposal and that her team is reviewing the document.
Metroland’s cuts are the latest hit for Canada’s media industry, which has lost at least 450 news operations in 323 communities, according to industry association Canadian Media Directors’ Council.
Torstar itself was acquired by Nordstar for $52-million in 2020. Torstar spokesperson Bob Hepburn said the company would not comment on any information that is part of the court process.
Metroland also owes its terminated employees $16-million, according to the Sept. 15 filing, but said it will not be offering severance or termination pay because of its untenable financial situation.
It also owes $8-million to the Canadian Imperial Bank of Commerce and $2-million to its printer, TC Transcontinental.
The company has blamed its “unsustainable” financial losses on changing consumer and advertiser preferences, as advertising dollars increasingly go to online companies.
Meanwhile, large technology companies are opposing Bill C-18, the Online News Act. The legislation, scheduled to take effect Dec. 19, is intended to force large platforms to pay into Canada’s news industry. Facebook and Google have both described the bill as unworkable.
Already, Facebook has removed news from Canadian sources from its platforms, and in a recent response to draft legislation, Google said it would also pull Canadian news if the government did not make revisions.
With reports from Joe Castaldo and David Milstead