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Animation studio, awarded $23M in provincial funding, declares bankruptcy

Last Updated Aug 3, 2016 at 4:44 pm EST

A Toronto animation studio which was awarded $23 million in provincial funding has declared bankruptcy, leaving more than 500 employees out of work.

In an email to staff on Monday, ARC Productions CEO Tom Murray said the company is experiencing “significant financial difficulties” and a “liquidity crisis” and hasn’t been able to resolve the matter with its lender.

“Unfortunately nobody knew anything, because lately everything has been very exciting — lots of new things coming, a brand new beautiful office,” art director Boris Andreev told CityNews.

“Now, this happens so unpredictably. That’s a tough thing for sure for everybody to go through.”

ARC’s collapse comes seven years after it received $22.975 million from Dalton McGuinty’s Next Generation of Jobs Fund. At the time, the company was known as Starz Animation Toronto and was Canada’s leading feature-length animation film studio. The money was expected to stimulate economic growth and give Ontario workers a leg up in a competitive field.

On Tuesday, Ontario’s Minister of Economic Development and Growth Brad Duguid said the province has become a North American leader in the industry, and the province will continue to support it.

“We will continue to invest in that industry and create thousands of jobs,” Duguid said. “We’re hoping that some of those jobs can go to the folks that may be out of work as a result of this decision.”

Duguid said generally these government programs have been “hugely successful,” with success rates of 88 per cent and higher. He said if a company doesn’t fulfill its job-creation obligation, the government claws back funding or at least part of it. Often the money rolls out over time, so a company wouldn’t get the money unless it does the hiring.

In ARC’s case, Duguid said the money may not be returned and added it’s impossible to control the fate of a single company in the global marketplace.

“It all depends on the original arrangement,” Duguid said. “If it’s a five-year arrangement, that’s expired now. You can’t hold a company on the hook forever. It’s a global economy.”

But PC Economic Development Critic Monte McNaughton denounced the province’s response.

“I think taxpayers deserve to know exactly what commitments and obligations the company was supposed to have with the government,” he said. “How many jobs were they supposed to create and did this company actually meet those obligations set up by the Liberal government?”

McNaughton said he was also concerned about the process by which Queen’s Park picked “winners and losers.” He pointed to last year’s auditor general’s report which found the bulk of companies receiving taxpayer money had been invited to apply.

ARC said its lender will be in court Thursday to arrange for Deloitte Restructuring Inc. to take possession of the business.

The company also said it’s working to pay outstanding wages, while it referred employees to the federal government’s Wage Earner Protection Program.

The studio has done the animation for popular kids show Thomas & Friends, some Marvel and Lego specials and the upcoming Netflix series Tarzan and Jane.