Creditors have forced Toronto-based animation studio Arc Productions Ltd. to shut its doors, locking out staff at the company best known for helping produce popular children's series such as Thomas & Friends.
The decision by one lender to seize control of Arc's assets leaves employees, who were turned away from the company's darkened offices on Tuesday by a notice from chief executive officer Tom Murray posted to the front door, unsure when or whether they will receive salary owed to them.
It also leaves the future of productions that are already in progress in limbo, such as the forthcoming animated film Blazing Samurai and the kids series Tarzan and Jane, which is expected to appear on Netflix later this year.
Arc, which was founded in 1990 and previously operated under the name Starz Animation, has been majority-owned by a group of Canadian investors since 2011. The company has exploded in size in the past year and a half, nearly doubling its staff and its clientele to keep pace with demand in a booming industry, though that growth has not always been smooth. The company's corporate LinkedIn profile lists its staff head count at 598 people as of last month.
"We regret to inform you that Arc is experiencing significant financial difficulties and a liquidity crisis. Despite the very best efforts of management to find a solution to this financial emergency, we have not been able to resolve this matter with our lender," Mr. Murray said in his notice posted at the company's red-brick Toronto offices on Richmond Street West.
Last Friday, Grosvenor Park Media Fund LP, a finance company founded in Toronto and headquartered in Santa Monica, Calif., went to court to push Arc into receivership under the Bankruptcy and Insolvency Act, according to court documents. The fund got an order on Tuesday from Justice Michael A. Penny of Ontario's Superior Court of Justice appointing Deloitte & Touche's restructuring division as the company's interim receiver, giving the consultancy oversight of all of Arc's assets. The lender will be back in court on Thursday, seeking to make that appointment permanent, which would give Deloitte "possession and control of the business," according to Mr. Murray's memo.
A court-appointed receiver typically acts on behalf of all creditors if a company is unable to make its loan payments, and can sell or liquidate assets to repay debts.
Calls and e-mails to Arc, Mr. Murray and Grosvenor Park were not immediately returned. A spokesperson for Deloitte confirmed it has been appointed interim receiver, and said Arc has not filed for bankruptcy.
Tuesday's news caught staff by surprise, though there were warning signs in recent months.
"They grew too big, too fast, and over the last six to eight months, we've had to turn clients away, we've had to stop production on things because we weren't able to actually facilitate the agreed-to deals," said a senior staff member, who spoke on condition of anonymity because they were not authorized to discuss the matter. "The fact that it went this far, this quickly, caught everyone off-guard."
Inside Arc's office, personal items were still visible, and a building permit for interior renovations dating from late 2015 was the only other information adorning the front windows. "Employees should not come to work unless they are asked to by Deloitte and wait to hear from Deloitte about picking up your personal belongings," Mr. Murray wrote.
"For the most part, people are treating it as the end of Arc Productions," the senior staffer said.
The company is working on a solution to pay outstanding wages, Mr. Murray said, but if unsuccessful, staff may have to turn to a federal program to receive up to $3,900 in back pay.
"I am so sorry that, in spite of all the efforts, I have been unable to resolve this crisis and apologize for that failure," Mr. Murray concluded.