the retreat in the wringer


It will be necessary to vigorously raise the bar to ensure the survival of the newspapers of Groupe Capitales Médias. Again. And the pension plan will most likely be at the heart of the sacrifices employees will have to make.

Francis Vailles
Francis Vailles
The Press

No one will escape, not even the current 840 retirees of Groupe Capitales Médias, who will see their monthly pension checks cut by 25%, in all likelihood *.

To better understand, let's take a look at the numbers. When Martin Cauchon bought The sun, The gallery and the other Gesca regional newspapers, in 2015, the company earned $ 71 million in annualized advertising revenue and was profitable. This year, it will be half as much, to 35 million, according to the documents of the bankruptcy trustee PwC **.

Since 2015, the company has made significant cuts to fill the hole and budget. Nevertheless, the financial difficulties are such that Capital Media is heading, this year, to an operating loss of some 9 million, after losses of 5.6 million last year and 4.8 million the previous year. Hence the use of the Bankruptcy Act.

And it's not over.

Not only will the Google, Facebook and other steamroller continue to do its job, but a cyclical decline in ad revenue will also be expected when a recession arrives.

Yes, government money will help, yes, public donations will be welcome, but it will still need to reduce costs, inevitably. And since salaries and benefits account for 45% of the organization's expenses …

How to reduce costs mainly without losing the best journalists who support the company? One can think of a merger of some regional newspapers, with sub-sections on Trois-Rivières and Sherbrooke in The sun, for example.

It will probably also question, in the medium term, to completely swap the paper for an Internet formula, accessible with a paid subscription. The bet will be bold: although it saves printing and distribution costs, it could scare old paper subscribers, still very numerous.

Retirement: deficit of 65 million

But one thing seems clear: To invest in the organization, a buyer will most likely require an end to costly defined benefit (DB) pension plans, which affect two-thirds of the 485 employees (the others are defined contribution).

Yesterday, in committee, the current CEO of Groupe Capitales Médias, Claude Gagnon, rightly pointed out that the actuarial deficit of the pension plans amounted to $ 65 million this year and that it was a major issue for the buyer.

This $ 65 million deficit is the amount the organization must fund in the future to allow current DB plan employees and retirees to receive the promised pension benefits. Taking into account the accumulated assets, the solvency rate of the four plans varies between 75 and 78%, confirmed Mr. Gagnon.

Thus, if the company goes bankrupt, PD employees will only be entitled to 75% to 78% of what is owed to them. In other words, they would receive a cut of some 25% of their retirement benefits. As for the 840 retirees, it will be down to their monthly checks that would be reduced from 22 to 25% for the rest of their lives.

The union members could have the reflex to oppose, to require the buyer to fully respect the agreements, but given the situation, it will be a good idea, since the other possibility, it will be the closure and loss of jobs, in addition to the pension plan.

At best, the buyer could put an end to the current regime and put an end to the $ 65 million deficit, but in exchange offer a much lighter new employee plan.

Each year, the group's four current pension plans cost Media Capital about $ 4 million, according to my estimates, a fortune in context.

The transferee's proposal could be, for example, a group RRSP, a defined contribution plan for all or a target benefit plan. In the current state of things, it may be very light, a little like Duty. And that will not change anything for current retirees: their pensions will be deflated by 22 to 25%.

Legally, a buyer who buys the group's assets would not be required to assume the past obligations of the plans (the $ 65 million deficit), according to my information. It will be very difficult for him, however, not to respect the union accreditations, the collective agreements and the future provisions of the pension plans, because of the article 45 of the Labor Code.

The way around this problem would be to make an offer that would be conditional upon the termination of the pension plans and the implementation of a new diet regime (or no scheme at all), after negotiations with the unions.

That's exactly what happened in 2012 with the White Birch Stadacona paper mill in Quebec City. The owner protected the business from bankruptcy by using the Act, and the purchaser made an offer to purchase conditional upon the termination of the defined benefit plan, in addition to settling with the Unifor union for the institution. of a new regime.

Seeing their benefits cut by 30%, pensioners have contested, even pursuing the union Unifor. But bad news for pensioners: they lost in the Superior Court in May 2018. Their case is on appeal.

See the judgment

In short, much for the employees and retirees of Groupe Capitales Médias.

* The group has 650 retirees who were union members and 190 non-union retirees, including former executives.
** Total annualized revenues, which include subscription revenues, were close to $ 119 million in 2015, for an annualized operating profit of $ 8.6 million. In 2019, projected revenues are less than $ 70 million and the expected loss is about $ 9 million.

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