Keiko Nakamura announces that bankruptcy process will proceed for former Goodwill Industries of Toronto, Eastern, Central & Northern Ontario (TECNO)
Statement from Keiko Nakamura
February 29, 2016 – Toronto, Ontario – After an exhaustive analysis and search for investors I have concluded that there is no viable option that allows the organization to reemerge from the bankruptcy process. A revival plan to re-open profitable stores, although feasible, cannot be achieved without significant financial investment. The present lack of security for a loan is an untenable risk for potential investors.
I am saddened to announce that the bankruptcy process will be moving forward. Of the $6 million debt, approximately $4.2 million is owed to former employees in vacation entitlement and severance. The Trustee, Pollard & Associates Inc., has called a meeting with creditors for March 2, 2016. With a Trustee in place, there is no longer a role for a CEO. I will continue to assist the Trustee on a voluntary basis.
Goodwill TECNO has played a vital role in Ontario communities. This loss severely disrupts the lives of former staff, many of whom may experience difficulty in finding an equivalent replacement position. The community at large has lost a reliable way of disposing of goods that are no longer needed while at the same time support the community; shoppers are left with fewer sources for reasonably priced goods; cities will incur a large increase in the volume of materials going to landfill; and at a time of rapid economic change those needing assistance in overcoming barriers to employment have lost one of the best available employment services.
I am grateful to former staff who helped work on the Restructuring Plan, as well as to those that established Renew the Good to support former vulnerable employees, and to a number of advisors who volunteered their time and expertise to help me to exhaust all avenues before reaching this conclusion.
I joined Goodwill TECNO knowing that a turnaround in its financial affairs would be an incredible challenge. For an organization that has been in place for decades, the difficulties were insurmountable and solutions were never simple as we tried our best to avoid this outcome. As an organization we worked through the challenges and the resilience of staff during times of change was remarkable. I have had the privilege of being part of this organization and I have witnessed over the last month what Goodwill has meant to many. I deeply regret that there is no way to save this company. I am thankful for the time I had at Goodwill and my good fortune to have been part of this magnificent group of people.
For further information: See attached Backgrounder
Former Goodwill TECNO – Backgrounder
What was the Proposed Restructuring Plan?
The Proposed Restructuring Plan to reorganize the operations provided a business plan with the financial investments, cost and revenue projections for:
- Reopening of four donation centres and seven retail stores that collect and sell donated goods;
- Preserving 215 jobs out of the 530 at the time of closure;
- Reducing unionized jobs by 54% (213 positions) and non-union jobs by 77% (105 positions);
- Scaled-down transportation and corporate services overhead;
- Discontinuance of a centralized recycling warehouse; and
- Restarting of employment services for people facing barriers to employment in the Fall of 2016.
The Proposed Restructuring Plan required:
- Loans or investments of $2 million as an opening balance to assist in the payment of arrears and any reopening costs;
- Concessions from the unionized staff including a reduction in labour hours and staff layoffs to align with operating hours and the low demand periods in winter; labour efficiency improvements at the seven retail locations; and benefit costs, including vacation entitlement, to be reduced and capped;
- Continuation of leases for eleven locations;
- A minimum of three volunteer directors to form a Board of Directors to operate; and
- Registration of a new business name and development of associated branding.
What factors negatively affected feasibility of the Proposed Restructuring Plan?
- Availability of funds to pay for outstanding arrears. Goodwill TECNO has no substantial assets as security for loans. Borrowing rates were not reasonable given the current financial state.
- Goodwill Industries International’s quick decision to withdraw its affiliation of Goodwill TECNO increased the risk for potential lenders and donors.
- Restrictions imposed through a Collective Bargaining Agreement and the challenges in meeting expectations of a unionized workforce and obtaining the needed flexibility in a retail environment.
- The absence of a Board of Directors to make timely decisions caused a delay in beginning the bankruptcy process.
- The loss of key assets, for example, several landlords terminated leases on properties. A key Attended Donation Centre was transformed into a parking lot.
Why didn’t Goodwill TECNO borrow money to reopen?
Potential investors identified that the Goodwill TECNO would be considered a high risk client with little assets to secure the financing. As a result, where available, the high interest rates to borrow could not be justified given the current financial state.
Who are Goodwill TECNO’s creditors?
The majority of creditors are former staff. They have received pay for hours worked up to and including January 16, 2016 when operations closed. They are owed approximately $4.2 million in vacation and severance pay. The other creditors include landlords of leased properties. The bankruptcy Trustee will meet with creditors on March 2, 2016.
What are Goodwill TECNO’s assets?
The bankruptcy Trustee will present an analysis of assets to the creditors. Assets are expected to be limited to a valuation of donated goods, equipment, and receivables for HST rebate and property tax rebates.
Cash has been exhausted by payment of outstanding wages to employees following the close of operations, re-payment of a bank line of credit, and the cost of legal services as well as the bankruptcy process.
Has Keiko Nakamura resigned as CEO?
On February 7, 2016 the organization assigned a Trustee to oversee the bankruptcy proceedings. The CEO role became limited to a support capacity to the Trustee. During this time, on a volunteer basis, Ms. Nakamura has assisted the Trustee while continuing to explore other options to attempt to avoid bankruptcy. Given that there are no plans to file a restructuring plan with creditors, Keiko Nakamura has resigned as CEO.
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