February 8, 2016 4:01 pm
Updated: February 8, 2016 7:26 pm

Toronto-area Goodwill stores seek bankruptcy protection with $6M owed; plans restructuring

Goodwill's Toronto store on Richmond Street, pictured Jan. 17, 2016, was among those closed.

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TORONTO — The Toronto-area branch of Goodwill thrift stores owes hundreds of former employees and other creditors $6 million as it seeks bankruptcy protection following the abrupt closure of 16 outlets that threw more than 400 people out of work.

Goodwill Industries of Toronto, Eastern, Central & Northern Ontario said in a statement Monday from CEO Keiko Nakamura that it has filed an assignment under Canada’s bankruptcy law.

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It says the filing is meant to preserve assets “for the benefit of its principal creditors, who are collectively the former employees of the corporation.”

READ MORE: Goodwill closes Ontario stores citing ‘cash flow crisis’

The statement says Goodwill is contemplating making a later proposal to its creditors which if approved would annul the bankruptcy and allow it to reopen some stores.

Goodwill says the plan has the support of the Canadian Airport Workers Union, which represents around 450 employees.

The union said in a statement it will be “closely monitoring” the bankruptcy and proposal process, and supports a restructuring that would reopen stores and get employees back to work.

A bankruptcy filing document dated Sunday shows the Goodwill branch deep in the red.

A “Statement of Affairs” document signed by Nakamura as part of the proceedings shows 711 unsecured creditors — including not just former workers but other businesses and even the provincial government — with claims adding up to just over $6 million. Assets are listed at a fraction of that: $835,000.

Some on the list who appear to be ex-employees have claims worth tens of thousands of dollars.

The Ontario Ministry of Community and Social Services has the largest claim — $150,000.

Last week Goodwill Industries International disaffiliated Goodwill TECNO, stripping it of the right to operate under the Goodwill name.

READ MORE: GTA Goodwill stores to stay closed as company seeks solution to cash-flow problems

Seeking bankruptcy protection while also making a proposal with creditors is unusual, said bankruptcy expert Douglas Hoyes.

“It’s a little strange because once the corporation goes bankrupt, you’re starting the process of liquidating everything — so what is there left to propose with?”

Hoyes said the move could be a negotiating tactic, albeit one complicated by losing the right to the Goodwill name.

“If I’m no longer part of Goodwill, what part of (a) restructuring proposal could I possibly come up with?”

On Jan. 17 Goodwill shut stores in Belleville, Brockville, Orillia and the Toronto area, sparking confusion on the part of employees and patrons of the thrift outlets alike.

The closures did not affect Goodwills in London, Sarnia, St. Catharines and Hamilton.

At the time Nakamura blamed the closures on a “cash flow crisis.”

The non-profit group has operated for more than 80 years in Ontario providing affordable goods and helping people gain access to training and work.

With files from Peter Kim, Steve Morales, The Canadian Press

© 2016 Shaw Media

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