Hollinger Canada files for CCAA protection
The last remnant of Hollinger’s Canadian media empire has filed for Ontario Court of Justice protection under the Companies Creditors’ Arrangement Act (CCAA).
Hollinger Canadian Publishing Holdings Co. (HCPH), which has two full-time and one part-time employee who administer pension and post-retirement benefit plans for more than 3,000 former Southam employees and their survivors, filed for CCAA protection on Dec. 9, 2009.
The company claims cash and other assets of $32.6 million and liabilities of $94.4 million. Its U.S. parent, the Sun-Times Media Group Inc. (STMG) filed for bankruptcy in March 2009 and almost all of its operating assets were sold in October 2009.
According to the court filing, HCPH has only two options available: “file an assignment into bankruptcy or to commence proceedings pursuant to the CCAA;
“Were HCPH to file an assignment into bankruptcy, it is likely that the trustee in bankruptcy would immediately cease allowing payments on non-registered pension plans and other post-retirement plans to be made. It could be years before such claims were resolved;
“HCPH believes that, as the Southam retirees (as a group) are clearly the largest creditor constituency, it is appropriate to commence these [CCAA] proceedings to avoid a dramatic and immediate cessation of benefit payments and to engage in a dialogue to seek an overall solution to the issues …”
While HCPH, formerly known as Southam, once owned the largest chain of newspapers in Canada, it sold the majority to Canwest in July 2000 and the rest to Glacier Media in January 2006.
When Canwest purchased the majority of HCPH assets it did not assume liabilities for any of the retired or inactive employees of the various purchased newspapers. Today the sole business of HCPH is to administer various pension and benefit plans generally related to the retired and disabled employees that Canwest declined to accept responsibility for.
This includes payment of certain medical benefits for retired and disabled members of Local 2000 who worked at Pacific Press. (These former members of Local 2000 receive their pension though the PNG Pension Plan, which is not in any way related to Hollinger.)
The bulk of HCPH’s financial responsibilities are to six registered pension plans and two retirement plans, listed below.
The Hollinger Canadian Publishing Co. Retirement Plan and the Windsor Star Employees’ Pension Plan, both of which are fully funded and members need not worry about their pensions.
Four, smaller plans, which are in a deficit position:
The Hollinger Canadian Publishing Holdings Co. Pension Plan for the Employees of Newspapers Formerly Owned by Thomson Newspapers, the Sterling Newspapers Company Pension Plan for the Employees of Newspapers Formerly Owned by Thomson Newspapers, the Hollinger Canadian Publishing Holdings Co. Plan for Employees Formerly Owned by Sterling Newspapers and the Journal Publishing Company Limited Employees’ Pension Plan.
In addition, two Hollinger management retirement plans are unfunded. These are the HCPH Co. Executive Retirement Arrangements and HCPH Co. Divisional Allowances /Top-Up Plan.
Because HCPH does not have enough assets to make up the deficiencies in these under-funded and unfunded plans, members may be at risk of having their pensions and or retirement benefits reduced. A court monitor and a chief restructuring office have been appointed as part of the CCAA process. They will recommend a plan to the court, which has the authority to impose a restructuring solution.
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Court documents outline some unfortunate and perhaps questionable events that directly lead to the current CCAA filing. While these will never garner as much attention as the jailing of former Hollinger owners Conrad Black and David Radler, they may similarly negatively affect the lives of thousands of people.
On Nov. 1, 2006, HCPH loaned the Sun-Times Company $50 million (US). This loan will never be repaid because of the Sun-Times financial woes.
In October 2008, HCPH made a dividend payment to its shareholders of $43 million. Much of this went straight to the Sun-Times Media Group, which entered bankruptcy protection a few months later.
Finally, also damaging the financial position of HCPH (and ultimately that of 3,000 retirees) was the company’s decision to invest $48.2 million (US) in Asset Backed Commercial Paper (ABCP). According to court documents $28 million (US) of these were sold for $21 million (US) and of the remaining $20.2 million (US), $7.1 million (Can.) may be recovered.
So, to summarize, a series of bad financial decisions turned a substantial surplus at HCPH into a deficit of over $60 million. The ultimate losers will include thousands of retirees.
Court documents can be found online at: http://documentcentre.eycan.com/Pages/Main.aspx?SID=131H
This entry was posted on Saturday, January 2nd, 2010 at 2:57 pm and is filed under Local News.
