General Publishing Co. received a favorable ruling late last month from the Ontario Superior Court, which found that the company owns its receivables. The court also extended General's protection from creditors until July 31. The decision made it feasible for the Bank of Nova Scotia to raise General's financing from C$1 million ($651,000) to C$3.5 million, which will help keep the company running. The bank was only willing to increase its financing to the bankruptcy-protected company if it was certain General would get the estimated C$16 million in receivables. The receivables may ultimately end up in the bank's hands since it is General's largest secured creditor.
Jack Stoddart, chairman of General Publishing, whose divisions include the Musson Book Company, General Distribution Services (GDS) and Stoddart Publishing, said he was heartened by the decision. In a statement, he expressed his plan to retire and anticipated that all his companies will move forward under new ownership.
Not everyone shared Stoddart's optimism. The Association of Canadian Publishers expressed serious disappointment with the court's decision.
"Our affected publishers are deeply distressed. While some have seen this as a lifeline to GDS and General, we see this as potentially the death knell for a number of Canadian-owned publishing houses," said Monique Smith, ACP's executive director. "We are deeply concerned and plan to appeal this decision." Smith said the ACP was also disappointed about the length of the 60-day extension, fearing it will have a negative impact on several of its publishers. While the proceedings continue, client publishers will not be able to remove their inventory from GDS.
After the decision, General outlined some provisions for its restructuring plan that will include the sale of a publishing company only if authors are paid in full before or at the time a new owner takes over. Other provisions include offering publishers that continue to use GDS certainty of payment for their sales and maintaining the right of return for booksellers. The provision also includes the sale of General Distribution and other General companies, subject to court approval after discussion with all the stakeholders, and with the staff of the companies having the likelihood of keeping their jobs in the process.
"This decision represents good news for the industry and all of General's stakeholders. I believe that in the long run, publishers will receive substantial repayment of the money owed to them and will, of course, retain full ownership and use of their inventories," Stoddart said. "There is still a long road to be traveled in this process, but the decision of Justice [John] Ground gave a clear and fair roadmap for the journey," he added.
Several days before the court's decision, the publishers at Véhicule Press sent out an open letter to Peter Godsoe, the president of the Bank of Nova Scotia, asking the bank to "rise above corporate interests" and not allow the 60 small-to-medium publishers to go out of business. "While legally Stoddart is still at the helm of the company during this period, it is apparent that the Bank of Nova Scotia is calling the shots," wrote Simon Dardick and Nancy Marrelli.
"The Bank of Nova Scotia is the only entity that has the power to allow the small-to-medium book publishers affected by the GDS debacle to continue in business. Not to do so would have the bank acting like a schoolyard bully," they said, adding that the receivables owed to the Canadian-owned publishers in the warehouse amount to C$3 million. "Not a princely sum for the bank, but our life blood," the publishers explained.
