'Thomas the Tank Engine' Animation Studio Files for Bankruptcy

Thomas the Tank Engine - H 2013

Thomas the Tank Engine - H 2013

Around 500 employees have been locked out at Arc Productions in Toronto, the former Starz Animation Toronto studio, now Canadian-owned and headed into receivership.

Arc Productions, the former Starz Animation Toronto studio behind the kids show Thomas and Friends, based on the popular Thomas the Tank Engine property, and the upcoming Netflix series Tarzan and Jane, has filed for bankruptcy protection in Toronto.

A letter pinned Tuesday on the front door of the downtown studio from Arc Productions CEO Tom Murray, and posted on the Toronto VFX Jobs blogsite, told around 500 locked out employees that the company “is experiencing significant financial difficulties and a liquidity crisis" and had been unable to reach acceptable terms with an unnamed creditor.

Neishaw Ali, president of Spin VFX and co-president of the Computer Animation Studios of Ontario, told The Hollywood Reporter that Arc Productions sliding into bankruptcy has left a fast-growing Ontario animation and visual effects sector reeling. "It is unfortunate and shocking that this happened to Arc. A few months ago they were hiring and they have a great slate of work," said Ali, whose company does visual effects for U.S. projects like the Fear the Walking Dead TV series and the Suicide Squad tentpole movie that was shot in Toronto.

Ali added Arc Productions now headed into receivership was apparently preceded by a "financial falling out of investors" after the company failed to meet debt obligations. The Ontario provincial government in late 2008 agreed to invest nearly $23 million annually in the then Starz Animation Toronto studio until 2013 to expand the facility and create 250 jobs.

The 3D animation studio became Canadian-owned in 2011 and was renamed Arc Productions after U.S.-based Starz sold a majority stake in the Toronto animation and visual effects studio to a local consortium. Starz no longer has an ownership stake in Arc Productions, a spokesperson for the cable networks group confirmed on Tuesday.

Brad Duguid, the Ontario minister of economic development and growth, told THR that his government remained committed to a provincial animation and visual effects sector now growing at 20 percent a year in size and with a combined revenue of $398 million last year.

"This is a sector that is doing very well in Ontario. I would see this as very much a one-off," said Duguid. A range of Hollywood and other foreign animation and visual effects studios have set up in Vancouver, Toronto and Montreal in recent years owing to generous tax credits and other local subsidies on offer from provincial governments.

Arc Productions recently had on its production slate the animated movie Blazing Samurai from Mass Animation, Marvel and Lego animated specials like Lego Marvel Super Heroes: Avengers Reassembled! and Disney Channel’s Elena of Avalor.

Arc Productions CEO Murray and executives at Deloitte Canada, who are to step in as the court-appointed interim receiver on Thursday, were not available for comment.