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Arc Productions is best known for helping produce popular children’s series such as Thomas & Friends.

Little more than a week after Arc Productions Ltd. closed its doors, overwhelmed by debt, the Toronto-based company's creditors have struck a tentative deal that could rescue some of its film and television projects.

Jam Filled Entertainment Inc., a full service animation company based in Ottawa that was acquired by Boat Rocker Media on Aug. 3, has in turn agreed to buy "substantially all of the business" ongoing at Arc, according to a memo sent to staff. Some of the 500-plus Arc employees who were put out of work last week could be hired to continue work on certain projects.

The memo was penned by Deloitte Restructuring Inc., which is acting as a court-appointed interim receiver with oversight of Arc's affairs after the Toronto-based animation studio repeatedly defaulted on more than $30-million (U.S.) in debts owed to Grosvenor Park Media Fund LP, a finance company based in California. The fund's decision to push Arc into receivership shut down the company on Aug. 2.

Deloitte auctioned the rights to assume Arc's ongoing contracts, awarding them to Jam Filled for an undisclosed sum. The deal should ensure that some projects resume, staffed in part by former Arc employees, but not all contracts will be picked up. Arc's largest ongoing project was providing animation services for the forthcoming film Blazing Samurai, which features Samuel L. Jackson and Michael Cera, and the company is best known for its role in creating the animated series Thomas & Friends.

The agreement needs court approval, and is conditional on "further due diligence" by Jam Filled and "other negotiations," including a provision that enough former Arc employees accept offers to work on the projects to make them viable, according to the memo. Jam Filled is not expected to assume any of Arc's debt.

"We are hopeful that this transaction can be concluded in the next two weeks and that the business of Arc can be restarted with new ownership and limited disruption," the memo says.

A spokesperson for Deloitte declined to comment, referring only to public documents detailing Arc's receivership available on Deloitte's website.

Boat Rocker Media was formerly known as Temple Street Productions, but restructured its business in February under an umbrella company with separate branches, aiming to grow its digital, animation and branding ventures. The company has been set on expanding since July, 2015, when Fairfax Financial Holdings Ltd., a Toronto-based insurance and investment firm, took a majority stake in the business. Founded in 2006, Temple Street was known for creating shows such as Orphan Black and X Company.

A spokesperson for Boat Rocker declined to comment. But in a statement announcing their acquisition of Jam Filled last week, Boat Rocker co-executive chairmen David Fortier and Ivan Schneeberg said the company "has made strategic investments in the family and animation space and the acquisition of Jam Filled will enable the studio to round out its abilities in 2D and 3D animation to develop even stronger, premium content."

In an interview earlier this year, Mr. Fortier and Mr. Schneeberg told The Globe and Mail they were "looking to acquire other entities as we build."

Documents filed in Ontario Superior Court of Justice suggest Arc's path to insolvency began in earnest late last year, when it agreed to loans of up to $45.3-million from Grosvenor Park. Arc defaulted on its obligations less than two months later, and failed to turn its business around despite being granted multiple reprieves by Grosvenor Park, according to the documents.

Although Arc had been rapidly expanding its business, financial statements filed in court show the company posted $9.2-million (Canadian) in losses in the first six months of this year. Other documents suggest it owed $250,000 in unpaid rent and $2-million for renovations to its office, plus another $1-million in payroll.

Follow James Bradshaw on Twitter: @jembradshawOpens in a new window

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