The Globe and Mail cited several unnamed sources in reporting this weekend that Dennis Skulsky has found a landing spot in Vancouver as the new president of the B.C. Lions. Nobody has gone on the record to say that he will succeed Bob Ackles, who died last year. And Lions owner David Braley told the radio station TEAM 1040 that Skulsky has not been offered the job.
As the publisher of the Vancouver Sun and Province, Skulsky was a founding member of the Waterboys, which tried to whip up support in the corporate community for the Canadian Football League team.
For now, Skulsky is president and CEO of Canwest Publishing, which produces metropolitan daily newspapers including the Vancouver Sun and Province, as well as community papers including the Vancouver Courier and the North Shore News.
The parent company, Canwest Global Communications Corp., saw its stock close at 11 cents on Friday (July 10) on the Toronto Stock Exchange.
It’s carrying a $3.7-billion debt, according to financial statements released the same day.
Just over $2 billion of this debt is denominated in U.S. dollars, so any time the Canadian loonie goes up, it’s good news for Canwest.
Canwest is based in Winnipeg, but it is a major employer in Metro Vancouver. And its deepening financial problems could have a profound impact on households across this region.
Not only does the corporation have a direct impact on employees of Global TV, the daily papers, and community papers distributed in every suburb, its fate is also of concern to numerous suppliers and contractors, not to mention advertisers.
Then there are retirees, some of whom expect to be paid out by a management pension plan that's underfunded to the tune of $1.7 million.
Right now, it appears that the company’s fate could be in the hands of five different financial houses, none of whom have any direct experience publishing newspapers or producing television programming.
Earlier this year CIBC and CIT Group put up $75 million to keep the company operating. CIT Group is a New York-based holding company with $60 billion in financing and leasing assets. It invests in media, among other areas.
Last May, the Globe and Mail's Andrew Willis noted in a blog posting that three creditors—Golden Asset Tree Management, Beach Point Capital Management, and West Face Capital—put up $100 million after Canwest failed to meet its obligation on Canwest Media’s US$761-million debt to holders of senior subordinated notes.
The three companies—two of which are based in the United States—represent 70 percent of the bondholders on this US$761-million debt. Golden Tree is populated by staff who are experts in creating collateralized debt obligations—yes, that's also a term used to describe the toxic mortgages that have been linked to the global financial meltdown.
The only Canadian fund, West Face Capital, is headed by former Vancouver resident Greg Boland.
In 2006, the Globe and Mail’s Derek DeCloet reported that Boland, who lives in Toronto, is “the investing world’s equivalent of a guy who enjoys car wrecks”. Yes, the vultures are circulating.
The senior subordinated noteholders are charging 12 percent interest. The money is funding operations and ensuring that the company can meet its monthly obligations on the $761-million debt, which was financed at an eight-percent interest rate.
If Canwest fails to complete a recapitalization agreement in principle with an ad hoc committee of the eight-percent noteholders by Friday (July 17), it could result in a demand that the company repay all of its debt. The final agreement must be in place by July 31.
In other words, the clock is ticking on Canwest, which is currently controlled by the Asper family. If an agreement isn't reached this month, it could push Canwest over the edge into bankruptcy protection.
If that happens, the company could be broken up and sold off, which accounts for the lousy share value.
The most logical buyer of Canwest assets in this market might be David Black, the low-key owner of Victoria-based Black Press, who has been buying newspapers in the United States. Black could fold community newspapers in each Metro Vancouver market, giving him a monopoly and the latitude to eventually raise ad rates.
Of course if this happens, there would be howls of outrage from the unions.
Toronto media giant Torstar Corp., owner of the Toronto Star, holds 20 percent of Black’s company; perhaps it could gain a greater equity stake in Black Press as a result of the Victoria-based company taking over Canwest assets in Metro Vancouver.
Another potential buyer of Canwest assets in this market is Vancouver-based Glacier Media, which is one of the few media companies that is still making money. It publishes Business in Vancouver.
The biggest national media players are Quebecor, CTVglobemedia, Rogers Media, and Shaw Communications, none of which are exactly flush with cash.
If CTVglobemedia took a run at Canwest's broadcasting assets, it could create a regulatory nightmare because it would end up owning almost everything. CTVglobemedia is light in the newspaper business—its primary asset is the Globe and Mail—so there might not be as big of a concern if it bought Canwest newspapers.
However, the largest shareholder in CTVglobemedia—the Thomson family—got out of the newspaper business several years ago. It's having trouble coping with the financial fallout of its takeover of Reuters.
This leaves open another possibility: regulatory changes that would permit greater foreign ownership of newspapers. If this were to happen, it's not farfetched to consider the possibility of a Chinese government-owned investment company or Rupert Murdoch's News Corp. swooping in on Canwest assets.
Meanwhile, Canwest Limited Partnership—otherwise known as Canwest Publishing—is not in compliance with its financial covenants, either. Its recent financial statements show that $874.2 million is due under the senior secured credit facility as of May 31, 2009.
“As a result of the payment default the derivative instrument counterparties terminated the hedging arrangements and demanded immediate payment of an aggregate of $69 million,” Canwest stated in its recently released financial statements. “Canwest Limited Partnership has not satisfied this demand and does not have adequate liquidity to satisfy this or any other such demand.”
This is a complicated way of saying that Canwest Publishing can’t pay its bills. And it’s why Skulsky might be happy to rid himself of the headache of being the president and CEO, move back to Metro Vancouver, and spend the rest of his working days sitting in a box seat watching the B.C. Lions.