page_title: Abitibi Power and Paper Company
section_title: Receivership (1932–1946)
hierarchical_section_title: Abitibi Power and Paper Company / Receivership (1932–1946)
caption_attribution_description: English: Mitchell Hepburn
context_page_description: Abitibi Power and Paper Company was a forest products business based in Montreal, Quebec, that was founded in 1914. The firm was a mainstay of the Canadian newsprint industry in the first half of the 20th century, and now forms part of Abitibi-Consolidated.
context_section_description: In 1927–1928, Abitibi financed a large redemption of its securities through a $55 million bond offering, while simultaneously promising an annual dividend of $4 million to its common shareholders. Between 1927 and 1934, newsprint prices fell from $70/tonne to $40/tonne. Abitibi was forced to run its mills at 28.4% of capacity in 1932 and 26.8% in 1933,  as well as suspending its dividend payments.
  Abitibi defaulted on its mortgage bond interest payments on June 1, 1932, and was placed in receivership. Many leases on its timber concessions were also expiring around the same time. On September 26, 1932, the company was declared insolvent under the Winding-Up Act and a provisional liquidator was appointed.
  Beginning in 1933, legislation was passed to allow Ontario Hydro to take control of several Abitibi power developments. Certain dealings relating to the 1933 acquisition came to be known as the "great Abitibi swindle," which resulted in the fall of the Henry government in the 1934 Ontario election, to be succeeded by that of Mitchell Hepburn.
  The Legislative Assembly of Ontario passed legislation in 1935 in order to bypass any subsequent application of the Companies' Creditors Arrangement Act. A liquidator was appointed on December 20, 1935. In addition, as any refinancing would be contingent upon reinstatement of Abitibi's timber limits, further legislation was passed to allow this to occur, subject to approval by the courts and the Lieutenant-Governor in Council. Hepburn felt this to be necessary in order to assure that any reorganization coincided with public policy, unlike what had happened in Quebec between Price Brothers Limited and the Taschereau administration. In March 1939, an order in council was passed that declared that any scheme receiving court approval would be considered acceptable to the government. When the Second World War broke out later in the year, and with public sentiment almost unanimous against foreclosure, the government withdrew its support but failed to rescind the order. Despite subsequent threats by Hepburn to cancel Abitibi's timber rights, a judicial sale of Abitibi's assets was ordered in 1940.
  Hepburn appointed a royal commission to investigate the matter, in order to determine the best course of resolution. The Legislative Assembly imposed a moratorium in 1941, which was ultimately upheld by the Judicial Committee of the Privy Council in 1943. The Commission's recommended plan was accepted by all creditors, but only after they accepted that prior consent would be required from the Province for any changes to Abitibi's production and conservation measures, and it would emerge from receivership on April 30, 1946—one of the longest such receiverships in Canadian history, which was seen to have been extended by the Ontario government's actions which ensured protection of jobs at high-cost mills throughout northern communities, as well as for common shareholders. However, the company's operations remained diversified after reorganization, and the proportion of Canadian ownership was higher after the receivership ended than it was in 1932.
caption: Mitchell Hepburn
exif: {"Image XResolution": "96", "Image YResolution": "96", "Image ResolutionUnit": "Pixels/Inch", "Image Software": "Paint.NET v3.5.11"}