Venerable Toronto bookseller Lichtman's News Agency Inc. has collapsed under $2.8-million in debt, citing fierce competitive pressures from category killer book stores and electronic commerce.
Lichtman's, whose roots date back to 1909, has spent the past three weeks trying to restructure and settle with dozens of creditors. But yesterday, the company voluntarily filed for bankruptcy, claiming assets worth just $2-million.
"We spent a lot of time trying to come up with a viable, workable, meaningful economic plan," said Arthur Jacques, the Toronto bankruptcy lawyer handling the Lichtman's case.
The company just wasn't in a position to make a massive and risky capital injection and weather a lengthy restructuring process required to save the nine-store chain, he said.
On March 6, the company, which has 108 employees, sought protection under the federal Bankruptcy and Insolvency Act. It had 30 days to develop a new business plan and submit it to creditors for approval.
A week shy of that deadline, Lichtman's owner, Gerry Ruby, decided there was no hope of competing with big-box stores Chapters Inc. and Indigo Books Music & More Inc., and Internet booksellers such as Amazon.com Inc.
"He started to feel the hit, hit, hit. He started to really hemorrhage in late February," Mr. Jacques said.
According to documents filed with the official receiver's office, unsecured creditors of Lichtman's include Canada Customs and Revenue Agency, which is owed $28,283.69. Frank Magazine, the satirical publication that thrives on publishing information about other people's problems, is owed $30,090. And Metro Toronto News Co. is owed $122,524.58
Publishers, including Bantam Books Canada Inc., Harpers & Collins Books of Canada, Oxford University Press and Random House of Canada Ltd., are also among the unsecured creditors.
Secured creditors are Bank of Nova Scotia, owed $1-million, and Gerenby Investments Ltd. of Toronto, owed $502,700.
Preferred creditors included employees, who are owed $18,000 in wages outstanding and another $31,900 in vacation pay.
Lichtman's inventory -- hundreds of thousands of books -- is worth almost $2-million. And the company has accounts receivable that are likely to be recovered worth $35,000.
Lichtman's is the latest casualty in Canada's book wars.
Last year, Duthie's Books Ltd., a long-time British Columbia bookseller that once had 10 stores, filed notice under the Bankruptcy and Insolvency Act that it intended to make a restructuring proposal. It cited crippling competition from much larger booksellers. In August, Duthie's creditors voted to accept a restructuring plan that would reduce the venerable B.C. chain to a single bookstore.
In Toronto, both the Children's Book Store and Britnell's Book Shop also recently closed their doors.
A parliamentary committee is currently studying the book industry and is to look at the impact of e-commerce and concentration of ownership.
Lichtman's stores will remain open on an interim basis, and inventory will be disposed of at prices that will benefit consumers, Mr. Jacques said.
Some stores and jobs could survive the process, he added, but it's premature to say how many.
"This is a true economic surgical decision. It's a sober decision," Mr. Jacques said.