(Halifax) A private equity fund is beginning insolvency proceedings against the SaltWire Group, which owns several newspapers in the Maritime provinces. According to the fund, the media company owes tens of millions of dollars after several years of mismanagement.
In documents filed Monday in the Nova Scotia Supreme Court, Fiera Private Debt Fund said SaltWire and The Halifax Herald jointly owed him 32.7 million. To this sum is added nearly $600,000 in accrued and unpaid interest.
About three-quarters of that amount is owed by SaltWire, which owns a number of news media outlets throughout the Maritime provinces, including Chronicle Herald of Halifax, Telegram of St. John’s and the Guardian of Charlottetown.
In filings, Fiera accused the company’s senior management of mismanagement, using employee pension funds for its operations and failing to remit the Harmonized Sales Tax (HST) among other allegations.
The documents say SaltWire’s businesses are insolvent and “on the brink of a liquidity crisis.”
SaltWire itself placed itself under the protection of its creditors under the Companies’ Creditors Arrangement Act (LACC), said its chief operating officer, Ian Scott, in a press release Monday evening.
Mr Scott said it was a strategic move to address the company’s financial challenges and ensure its long-term viability.
He added that the “unprecedented challenges” facing Canada’s media industry have affected SaltWire’s operations and financial health.
However, he said operations would continue as usual as the company hopes to restructure its finances and operations and is taking all necessary steps to minimize the effect of the process on stakeholders.
“We remain fully committed to providing high-quality journalism and maintaining the trust and support of our communities, as we have for nearly two centuries,” Mr. Scott said.
In its filings, Fiera claims it loaned money to SaltWire to help finance its 2017 acquisition of several businesses from Transcontinental Nova Scotia Media Group.
The documents indicate that The Herald was recently ordered to pay more than $2.6 million in unpaid pensions and that SaltWire was recently ordered to pay $500,000 in security for costs related to litigation regarding its acquisition of Transcontinental.
The debt resulting from the acquisition, “the pressures created by multinational social networks” and the court order requiring a contribution of $2.6 million to a pension fund have put “unbearable pressure” on SaltWire, said Mr. Scott.
Fiera filings indicate that as of January 2, SaltWire and The Herald owed the Canada Revenue Agency more than $7 million combined in HST collected and not remitted.
Fiera says the companies have been in default for more than five years, have made little progress in repaying their principal debts and have no plans to do so. Fiera says it has made “significant concessions” to borrowers, who refuse to meaningfully discuss lenders’ concerns about the companies and their debt.
Recently, Fiera said, SaltWire and The Herald sought to find an investor or buyer for the business, but were unable to secure an acceptable offer.
The filings seek to appoint KSV Restructuring as the court-appointed monitor for CCAA proceedings, and to appoint a director to oversee the company’s restructuring.
They confirm that Fiera will be the first lender to be reimbursed in the event of a sale or dissolution of SaltWire.
Meanwhile, SaltWire is seeking to appoint the firm Grant Thornton as controller, Mr. Scott said.
He said the company would not comment further on the filing, but would provide updates on the CCAA process online.