April 25th, 2024

Atlantic Canada’s insolvent SaltWire Network granted extension to creditor protection

By Michael MacDonald, The Canadian Press on March 22, 2024.

The Chronicle Herald headquarters, SaltWire Network Inc.'s flagship newspaper, is shown in Halifax on Tuesday, March 12, 2024. A Nova Scotia judge will be asked today to approve a plan to restructure or seek bidders to buy or invest in SaltWire Network Inc., the insolvent Halifax-based media company recently granted protection from its creditors. THE CANADIAN PRESS/Darren Calabrese

HALIFAX – A Nova Scotia judge approved Friday an extension to a court order protecting Atlantic Canada’s largest media company from a long list of creditors owed more than $90 million.

Nova Scotia Supreme Court Justice John Keith said insolvent SaltWire Network Inc. can continue to operate under the Companies’ Creditors Arrangement Act (CCAA) until May 3. At that time, the company will likely apply for another extension as it tries to restructure and survive.

“We’re just preparing a road map,” Keith told the court.

The judge also approved a proposal by SaltWire’s principal lender, Fiera Private Debt, to loan SaltWire $1.5 million in operating funding. Fiera, as senior secured creditor, is owed more than $32.7 million, but it has chosen to work with SaltWire on its restructuring or sale of its assets instead of forcing it into receivership.

Fiera loaned $500,000 to SaltWire on March 13 when Keith first granted the media company creditor protection and appointed a monitor to oversee a restructuring and recapitalization process that will ensure creditors receive some payment for what they are owed.

The potential restructuring could include the reorganization of some or all of the companies that are part of the SaltWire media group. The Halifax-based company owns daily newspapers in Nova Scotia, P.E.I. and Newfoundland and Labrador, including Halifax’s Chronicle Herald, the Cape Breton Post in Sydney, N.S., the Telegram in St. John’s and the Guardian in Charlottetown. It also owns 14 weekly publications.

SaltWire and its affiliates employ about 390 people, including more than 100 unionized staff; the companies also have 800 independent contractors.

In a motion filed earlier this week with the court, Fiera proposed a so-called sale and investment solicitation process (SISP), which it wants overseen by FTI Capital Advisors Canada. The SISP involves canvassing the market for investors willing to put money into the deeply indebted companies or purchase their assets.

Under this proposal, formal bids must be presented no later than May 24 at 5 p.m., and the transactions involving winning bids are expected to close by July 31.

During the court hearing on Friday, Keith raised many questions about the SISP process and eventually said he would provide an oral decision about the proposal on Monday.

Meanwhile, he approved a Fiera motion calling for expanded powers for the court-appointed monitor overseeing the CCAA proceedings – Toronto-based KSV Restructuring Inc. – and the chief restructuring officer, David Boyd of Resolve Advisory Services Ltd.

Earlier this week, Fiera’s director of special situations, Russell French, filed an affidavit saying these expanded powers are necessary because the lenders want to ensure the integrity of the sale/investment process. He indicated there is concern about former SaltWire president and CEO Mark Lever, who has said he plans to submit a bid.

“Given the concerns expressed by the lenders in their faith in (SaltWire) management, such powers will provide the lenders with the confidence required to continue to fund these proceedings,” French’s affidavit says.

Court documents show SaltWire and its related companies are owned by Lever and his wife Sarah Dennis through separate family trusts that each have a 50-per-cent stake in the businesses.

French confirmed that, as of last fall, the SaltWire companies, with the help of FTI Capital Advisors, had encouraged interested bidders to take part in a recapitalization process, but that led nowhere.

“The lenders remain hopeful that a third-party buyer for a (viable business) transaction can be found,” French said in his affidavit.

Fiera alleges the companies were mismanaged over the years and senior managers failed to make payments on employee pensions or remit HST payments to the federal government.

The documents note that The Halifax Herald Ltd. was recently ordered to pay more than $2.6 million in outstanding pension liabilities. And as of Jan. 2, Fiera said The Herald owed the Canada Revenue Agency more than $7 million combined in collected and unremitted HST.

Outside the court, chief restructuring officer David Boyd confirmed Friday that the Herald was now making HST payments.

In its filings, Fiera has said it loaned money to SaltWire to help it pay for its 2017 acquisition of almost two dozen newspapers from Transcontinental Nova Scotia Media Group Inc. SaltWire was recently ordered to post $500,000 as security for costs in litigation over its Transcontinental acquisition.

SaltWire has said the companies have struggled to cope with “the pressures created by multinational social media networks” and the poor performance of its Transcontinental publications.

On another front, court heard that one of SaltWire’s businesses, Headline Promotional Products, would be wound down, throwing 10 people out of work. The company sells promotional items, including work wear, apparel and drinkware. The company lost $350,000 last year.

This report by The Canadian Press was first published March 22, 2024.

Note to readers: This is a corrected story. A previous version suggested that KSV Restructuring could be replaced as monitor by Toronto-based law firm Chaitons LLP. In fact, Chaitons will be acting as the monitor’s legal team.

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