What creditor protection means for Black Press, its papers, and readers

On Monday, the owner of dozens of BC community newspapers—including those in Langley, Chilliwack, Abbotsford, Mission, Hope and Agassiz—filed for creditor protection.

In court filings, the company declared that it didn’t have the means to pay back huge debts—many incurred while buying an American newspaper in 2006.

Yesterday, The Current published a long in-depth piece about Black Press’s history, how it ended up losing more than $150 million on an Ohio newspaper, and how technological changes have left it unable to come back from its costly mistake.

• READ MORE: How an Ohio newspaper sank a BC publishing empire

Today, we’re reporting on what it means to be in creditor protection, and what Black Press’s sale and financial status may herald for the century-old community institutions it controls.

Black Press’s future is uncertain.

In addition to filing for creditor protection, the company has been bought by an American newspaper publishing company and two investment agencies. The company and its papers will continue operating. In announcing the sale, the company’s new CEO, Glenn Rogers, declared that Black Press “will continue to provide by far the best local Canadian and American news coverage in our markets and the best ways for advertisers to reach their customers.”

But creditor protection inevitably means change for companies, their workers, and their customers (and, in the case of publishers, their readers). And rarely is that change positive.

Here’s what we know about the deal, and what it could bring for the community institutions.

Creditor protection

Companies file for creditor protection when there is little prospect that they can repay all their debts. In fiscal terms, this occurs when a company’s liabilities exceed its assets and when it has run out of time (and money) to increase profits and reverse that equation.

Black Press currently owes more than $60 million but has struggled to meet debt payments because of a lack of revenue due to the pandemic, economic pressures, and the fact that newspapers aren’t nearly the profit-driving force that they once were, thanks to the Internet. The company says it has sold more than $45 million in real estate in recent years and cut $30 million in costs. But it hasn’t been enough.

Creditor protection is governed by the Companies’ Creditors Arrangement Act in Canada. It is a court-driven process that allows a company to restructure its debt. The courts are involved because the restructuring is not a pain-free process and because it involves balancing obligations to creditors. The restructuring requires deciding upon a pecking order for creditors; i.e. who gets their money back first, and how much money every creditor will receive. The courts determine that order—and they also oversee the company’s efforts to pay back that money.

Not all creditors are necessary lenders. Creditors can be suppliers of goods and services a company sells or uses to assemble its product. (So if a newspaper buys newsprint from a supplier and it hasn’t yet paid its monthly—or yearly—bill, that supplier can be a creditor.) Employees are also inevitably creditors: both because they are paid at the end, rather than the start, of payroll cycles, and because a worker whose employment is terminated is owed severance. (And restructuring inevitably brings job losses and cuts.)

When a company enters creditor protection, it is a sign that not all creditors may ever get all their money back. Creditor protection signals a company can’t see a way out of its financial hole even if it were to sell off components of its business (including properties but also subsidiary companies) and dramatically cut costs.

In return for being permitted to not pay all its bills as promised, the court takes power away from a company and its executives. Those executives may still be putatively in charge, but their decisions are limited by the court and overseen by court-appointed administrators. It’s their job to make sure that the company makes decisions that will help return as much money as possible to its creditors.