A private equity fund is initiating insolvency proceedings against Atlantic newspaper owner SaltWire Network Inc., claiming it owes tens of millions of dollars after several years of mismanagement.
In documents filed to the Supreme Court of Nova Scotia on Monday, Fiera Private Debt Fund said SaltWire and The Halifax Herald Ltd. together owe it $32.7 million, plus almost $600,000 of accrued and outstanding interest.
About three-quarters of that debt is owed by SaltWire, which owns a number of news publications across Atlantic Canada including Halifax's Chronicle Herald, the Telegram in St. John's and the Guardian in Charlottetown.
Fiera said in the filings that senior management of the company mismanaged the business, used employee pension funds for operations and failed to remit HST, among other allegations.
It said in the documents the companies are insolvent and "on the verge of a liquidity crisis."
SaltWire itself has applied for creditor protection under the Companies' Creditors Arrangement Act, its chief operating officer Ian Scott said in a statement Monday evening.
Scott said it's a strategic move to address the company's financial challenges and ensure its long-term sustainability.
He said the "unprecedented challenges" facing the media industry in Canada have affected SaltWire's operations and financial health.
However, he said operations will continue as usual, as the company hopes to restructure its finances and operations and is taking every measure to minimize the effect of the process on stakeholders.
"We remain fully committed to delivering high-quality journalism and maintaining the trust and support of our communities as we have for nearly two centuries," said Scott.
In its filings, Fiera said it loaned money to SaltWire to help fund its 2017 acquisition of several businesses from Transcontinental Nova Scotia Media Group Inc.
The documents note that The Herald was recently ordered to pay more than $2.6 million in outstanding pension liability, and SaltWire was recently ordered to post $500,000 as security for costs in litigation over its Transcontinental acquisition.
Debt from the acquisition, "the pressures created by multinational social media networks" and the court decision mandating a $2.6-million contribution into a pension fund have placed "an unsupportable strain" on SaltWire, said Scott.
The Fiera filings say that as of Jan. 2, SaltWire and The Herald owe the Canada Revenue Agency more than $7 million combined in collected and unremitted HST.
Fiera said the companies have been in default for more than five years, have made little progress in repaying the principal of their debt and have no plan to do so. It said it provided "significant concessions" to the borrowers, which are refusing to meaningfully discuss the lenders' concerns about the businesses 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 Inc. as the court-appointed monitor for CCAA proceedings, and appoint a chief restructuring officer.
They also aim to position Fiera as the first lender to be paid back if SaltWire is sold or dissolved.
Meanwhile, SaltWire is seeking to appoint Grant Thornton Ltd. as monitor, said Scott.
He said the company will not be making additional comment on the filing but will provide updates on the CCAA process online.
This report by The Canadian Press was first published March 11, 2024.
For more Nova Scotia news visit our dedicated provincial page.
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2024-03-11 21:47:00Z
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