No refunds offered in partial deal

Nova Corp.’s court-appointed administrators plan to sell 30 of the failed language school chain’s 670 branches to G.communication grp. and liquidate the rest, making tuition refunds very unlikely.

Nagoya-based G.communication, which also runs cram schools and restaurants, said the takeover would happen immediately with an eye to resuming lessons and eventually running as many as 200 of the bankrupt Osaka-based chain’s schools. It reportedly plans to accept paid-up Nova students and offer them classes at a discounted price.

“Our company has been unofficially selected to become a sponsor in order to fund Nova’s operations,” G.communication said in a press release late Tuesday without specifying details of the deal, which was announced before it could be approved by the Osaka District Court.

According to the statement, the schools would be taken over by G.communication’s wholly owned subsidiary, G.education Co., which runs 42 English conversation schools under the EC Inc. brand mainly in Hokkaido. It will initially take over 30 of Nova’s schools but reportedly plans to run about 200 Nova branches under their original brand.

Nova’s court-appointed administrators had been under pressure to find a sponsor quickly to assume some of its previously estimated �43.9 billion in debt, including�4 billion in unpaid salaries.

One of the administrators said a deal had to be made quickly because Nova’s corporate value was plummeting. Under the Corporate Rehabilitation Law, revised in 2003, a failed firm can sell its operations on the basis of brief court permission, even if its reconstruction program has not been approved.

As for the at least �4 billion in salaries owed to Nova’s 7,000 employees, including some 4,000 foreign teachers, some of whom haven’t been paid since August, Nova has said it will pay part of the money owed by using government money. But how much each teacher will get and when are causes of concern, said Koji Yamahara of the Osaka-based General Union, which represents some Nova workers.

“The unpaid salaries will come from public funds. But there is a maximum payout limit and it will take at least six months for Nova staff to get even a portion of their back wages,” he said. “Many staff members are now hurting financially. They should receive immediate payment of what they are owed.”

The General Union is warning of further trouble and chaos unless the new sponsor quickly clarifies how it will deal with the unpaid wages.

But the decision to offer a discount to Nova’s students instead of refunds was criticized by the union, which said it will pursue the case in court.

“The decision (by G.communication) not to return any money to Nova’s students is cruel,” Yamahara said. “The union will continue negotiations on this matter with the court and the government.”

One of the administrators said the Nova failure is likely to go down as the one that caused the most financial damage to “the largest number of creditors,” in postwar Japan.

G.communication has agreed to allow Nova’s students to buy the same kind of lessons they were taking at Nova for about 25 percent of what they paid there.

Dennis Tesolat, the General Union’s general secretary, said the details about re-employing Nova teachers also needs to be clarified.

“Both G.communication and Nova’s court-appointed lawyers have said that all of those who want to be re-employed will be. But how are they going to ensure this happens and under what conditions will the teachers be employed? This remains unclear,” Tesolat said.

But Jamie Scarrabelotti, who used to work at a Nova multimedia center in Osaka, said most Nova staff he knows were skeptical about the prospects of finding new employment and getting their wages paid. “We’ll try to get our owed wages, but, frankly, I don’t think many Nova teachers expect to get fully reimbursed,” he said.

On Oct. 26, Nova filed for protection from creditors and completely shut down operations, putting nearly 7,000 employees out of work and leaving nearly 300,000 students in limbo.

In Tokyo, Toby Gummer, a Nova teacher who visited a public job security office, said the bankruptcy announcement should have come earlier.

“They knew they didn’t have money several months ago. They should’ve declared bankruptcy then,” said Gummer, an Aussie who taught English for more than three years for Nova in the Akasaka district.

He said many Nova teachers are in financial difficulty and have started thinking about going back to their home country, including himself.

“I think I have to go home next week,” he added.

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A New Zealander in Japan was forced to dip into his savings and move house after a “tightening up on photocopy paper and lightbulbs” tipped him off that the country’s largest chain of English language schools was in financial trouble.

Cole Cameron, who moved to Japan 18 months ago to work for Nova, said he had to find a new job and was $8000 out of pocket following the collapse of his former employer.

The 23-year-old, originally from Havelock North, is one of about 200 New Zealanders affected by last week’s collapse, with many left stranded and owed money.

Mr Cameron told the Herald from Saitama Prefecture that he had managed thanks to “conservative financial management”, savings and backing from his parents in New Zealand should he need it.

He said the situation at Nova had been noticeably deteriorating for the past five months, since he first noticed tighter measures on stationery.

Employees who had accommodation arranged through Nova started experiencing problems shortly afterwards.

“Rental fees weren’t being paid even though they were deducted from the salaries. Our salary paper said we’d paid the rent but it hadn’t been passed on to the landlord.”

Mr Cameron was in Nova accommodation, but saw a risk and moved into his own accommodation. He said different levels of staff were affected at different times.

“The bulk of the regular instructors were the last to have their contracts breached,” he said.

“It started off with the Japanese staff having their contracts breached in August by failure of payment, then the management, which included foreigners and Japanese, had their contracts breached in September where their salary was two weeks late.

“And then everybody had their contracts breached in October with failure of payment and we haven’t been paid yet.”

But despite being owed $8000, Mr Cameron said he would not let it ruin his stay.

“My personal view is you can’t sit around and cry over spilt milk. You’ve just got to get on with it, and I’ve been fortunate in the sense I took that attitude a long time ago and went and got another job.

“Some people only got that attitude over the weekend and have found there’s nothing there. It’s a difficult situation all round.”

He started a new job teaching English this week, but it’s been tough financially.

“There’s obviously still that gap of two months’ salary [plus owed leave]. I’m getting through, but essentially I need that two months’ salary.”

Mr Cameron, whose last day at Nova was October 25, said it was possible he would get some of his money back because Nova salaries were government insured, but he wasn’t holding his breath.

“This situation highlights the importance of careful planning and risk management for anybody travelling overseas.”

He said one of the most annoying things was the lack of information about what was going on.

“A lot of the Western folk jumped ship the day after we weren’t paid and some of them have just left the country and the company is none the wiser.”

The New Zealand Embassy in Tokyo said it received a steady stream of calls from New Zealanders caught up in the situation, and was offering advice, but not financial assistance.

Last Friday, Nova dismissed co-founder Nozomu Sahashi and filed for protection from creditors with the Osaka District Court. Its debts are estimated to be 43.9 billion yen ($500 million)

The company was founded in 1981 and relentlessly expanded, working towards its goal of 1000 schools nationwide.

Nova had 300,000 students at about 670 schools. It employed about 7000 staff, around 4900 of whom were foreigners.

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