The end of SaltWire: What happened and what happens next?

On Monday, a private equity firm called Fiera Private Debt started the legal process to dissolve SaltWire.

At stake are the jobs and livelihood of hundreds of reporters, printers, delivery drivers, and related staff across three provinces.

SaltWire was created by the owners of the Halifax Herald in 2017 specifically to purchase most newspapers in Nova Scotia, Newfoundland, and Prince Edward Island from Transcontinental Media. The purchase price was $33,325,500 with $23,325,500 paid up front and the remaining $10 million to be paid over three years, at an interest rate of 3% compounded annually.

Fiera financed the deal. Collateral for the loan was all of SaltWire’s property, including its real estate, newspapers, printing presses, and subsidiary businesses.

In 2019, SaltWire reneged on the Transcontinental deal — it refused to pay the $10 million and instead sued Transcontinental, claiming that Transcontinental had overvalued its properties and misled SaltWire about the financial footing of the various newspapers.

The fundamental business was never good, but the 2019 lawsuit allowed SaltWire to kick the can down the road a bit. Along the way, SaltWire closed some of its papers, consolidated others, turned daily papers into weekly papers, reduced and in some cases eliminated home delivery, and most recently started putting obituaries behind a paywall.

Meanwhile, the financial side of SaltWire was collapsing. In January 2020, the Canada Revenue Agency (CRA) registered a judgement against SaltWire for unpaid taxes in the amount of $3,079,987.88, plus interest. From Monday’s court filing, we now know that SaltWire owes the CRA over $7 million in unpaid HST remittances.

The company also refused to pay $2.6 million the Superintendent of Pensions ordered SaltWire to pay into the pension fund for Halifax Herald employees.

SaltWire stated its business strategy plainly in legal filings related to the Transcontinental lawsuit: It would fend off pending bills until money started flowing in from the federal payroll tax rebate, which it estimated would be $1 million annually, and a Google payment through the Online News Act, which SaltWire claimed would be up to $2.5 million annually.

But there wasn’t enough runway. Through the years, Fiera had signed nine different “forbearance agreements” with SaltWire — basically, rewriting the terms of the financing. Fiera says that SaltWire has only paid about a third of the monthly payments required on interest on the loan, and none of the principal. In total, SaltWire now owes Fiera more than $32 million, with interest continuing to pile up.

In a last ditch effort, Fiera offered SaltWire the opportunity to deliver a “letter of intent” (LOI) by Jan. 31. If Fiera agreed, that LOI would present a strategy for SaltWire to refinance its debt by either finding a new investor or selling the business. But SaltWire failed to meet the deadline.

Then, two judges ruled against SaltWire. In February, Justice Scott Norton upheld a $2,656,656 order against SaltWire related to the pension fund. A couple of days after that ruling was published, SaltWire presented a “draft” LOI to Fiera, but Fiera rejected it.

And last week, Justice Gail Gatchalian ordered SaltWire to pay $500,000 in security for costs related to its lawsuit against Transcontinental Media.

That pair of court judgments against SaltWire caused Fiera to pull the plug.

On Wednesday, lawyers for Fiera will appear before Justice John Keith and ask him to begin the corporate dissolution of SaltWire. This is a complicated and yet orderly process that will likely take several months to unfold.

The short of it is that there will be an asset sale.

Some of SaltWire’s subsidiary businesses — like Titan Security, a security and health services firm, and Headline Promotional Products, which sells swag to corporations — may be profitable, or close enough to profitable that someone will buy them up and continue to operate them.

The newspapers are a different story.

Judging from SaltWire’s claims of expected payroll tax rebates, the company has about 100 reporters. SaltWire says it has a total of 490 employees and 840 subcontractors.

It’s speculative at this point, but it seems likely that there will not be a buyer for any of the rural newspapers. They’ll just close, and all the employees will lose their jobs.

There are three or four papers that might interest a potential buyer or buyers: the Halifax Herald, the Charlottetown Guardian, the St. John’s Telegram, and (maybe) the Cape Breton Post. Perhaps some buyer(s) will think the branded names of those papers have some value and they can piece together a business model for those papers. Or maybe not.

But even if those four papers continue to exist in name, it won’t be in anything like the current version of the papers. They’ll basically be ad sheets. And in the process, most, probably the vast majority, of current employees will lose their jobs.

This also means the end of the unionized jobs at the Halifax Herald, as it’s certain that even if the paper continues to exist in name, no buyer will recognize the union.

That’s an enormous personal tragedy for hundreds of people working in an industry where they’ll be unlikely to find similar work.

There’s apparently money to be made in winding down newspapers. Each sale is leveraged by debt, which is then defaulted on, leading to a sale financed by new debt. Rinse and repeat, and the private equity firms and executives earn their millions along the way, as the people doing the actual work of putting out a newspaper lose their jobs.

PostMedia, which bought out the Irving papers in New Brunswick in 2022, might have an interest in picking up papers in Atlantic Canada, providing it with the opportunity to offer advertisers a truly national platform. But PostMedia itself has an enormous debt load, so large that the owners of the Toronto Star reportedly rejected a merger deal for fear of the debt. So put a PostMedia purchase as a maybe but doubtful.

It’s been suggested to the Examiner that the current executives at SaltWire — Sarah Dennis and Mark Lever — might try to purchase the Herald back. That would be quite a feat, bringing the paper back into the Dennis family fold while killing the union at the same time. But we have no idea if Dennis and Lever have interest in buying the paper, or even the ability.

Perhaps there’s some unknown potential buyer, but it seems unlikely that anyone will want to invest in newspapers in Atlantic Canada with any intention to keep the papers running as they have been. An imagined buyer will likely simply want to pick over the rotting corpses for the very last morsels of value.

While the dissolution of SaltWire is foremost a terrible personal tragedy for the workers, it’s additionally a tragedy for news consumers. Even through the repeated downsizing and restructuring, the SaltWire papers provided the basic community news that won’t be replaced any time soon, if ever, and that is an enormous loss for communities, and ultimately, democracy.