Metroland Media Group, the sister company to the Toronto Star that filed for protection from creditors last month, has said it intends to pay unsecured creditors — including more than 600 employees laid off last month — at least 13 cents on the dollar for what they’re owed.
In its proposal to creditors, released late Tuesday, the company said it has a total of $15.5 million in assets alongside debts of over $78.2 million.
The company says it intends to pay former employees an amount equal to which they would receive under the Wage Earner Protection Program (WEPP), a federal program that covers a portion of wages, vacation pay and severance owed to employees in a bankruptcy or receivership, to a maximum of $8,278, which they refer to as the “employee basket.”
In addition to that amount, it intends to also pay former employees approximately 13 cents on the dollar for any residual amount remaining owing after the employee basket is paid. All other unsecured creditors were also offered 13 cents on the dollar for what they’re owed.
The company is also filing a court application for permission to seek funding from the WEPP, which has the potential to increase the distribution to other creditors, as well as former employees on their residual claim, to 26 cents on the dollar.
The sole secured creditor is CIBC, to which Metroland owes $7.2 million on a line of credit. Among the amounts owed to unsecured creditors are $32.3 million to Torstar (and other intercompany payables), $9.3 million to Toronto Star Newspapers and $345,029 to digital analytics company Clue Digital.
Metroland is owned by Torstar Corp., which is in turn controlled by NordStar Capital. A spokesperson for Torstar declined to comment.
In an emailed statement, Unifor national president Lana Payne called the news “devastating” for workers.
“This is yet another attack on journalism,” said Payne. “This is devastating for our members, who have given their livelihoods to this company. Workers who took a package, to save jobs for a younger generation, are left financially precarious.”
The proposal will be voted on by unsecured creditors on Nov. 14. If it isn’t approved, the company will be declared bankrupt and remaining assets liquidated.
If the company becomes bankrupt, unsecured creditors could get just five cents on the dollar in a best-case scenario, according to a report by insolvency trustee Grant Thornton.
“The Proposal Trustee is also of the view that in a bankruptcy scenario, the realizable value of the accounts receivable has the potential for significant impairment,” said the report.
The proposed payouts to creditors may seem small, but they are more generous than the payouts in most proposals and bankruptcies, said Edmonton-based insolvency expert David Lewis.
“The average proposal pays out three cents on the dollar, and the average bankruptcy pays one cent,” said Lewis, a partner and vice-president at BDO Canada, which isn’t involved in the Metroland case.
The report noted that Metroland’s financial stresses were exacerbated by — but not caused by — the global COVID-19 pandemic.
“While the acceleration of Metroland’s problems can be attributed to the COVID-19 pandemic, its core challenges are simply on account of a shift in the way readers obtain their news,” said the report.
The report also said there would be “little to no liquidation value” to most Metroland assets — including machinery and equipment — other than the accounts receivable, which make up the bulk of the assets.
Friday, the court approved the appointment of law firm Koskie Minsky to represent non-union employees dismissed by Metroland.
On Sept. 15, NordStar Capital filed a notice of intent to seek protection from creditors, citing “unsustainable financial losses stemming from the changing preferences of consumers and advertisers.”
As part of the restructuring, Metroland cut 605 jobs — roughly two-thirds of its workforce — and turned 71 weekly newspapers into online-only publications. Just over 100 of the fired workers are unionized and represented by Unifor.
