Canwest's creditors offer another reprieve

Canwest Global Communications Corp. issued a news release yesterday announcing that a group of creditors has extended a deadline once again.

An ad hoc committee of holders of eight-percent notes in the subsidiary Canwest Media Inc. were supposed to have agreed  by July 31 on a recapitalization agreement. That was extended to August 14.  According to a company news release, it has been extended again to August 28.

The holders of 12-percent senior secured notes have also extended the deadline to August 28. Canwest, which owns the Global TV network and 13 major daily newspapers including the Vancouver Sun and Province,  is carrying a $3.7-billion debt.

Comments

6 Comments

Salty

Aug 16, 2009 at 12:04pm

Are you surprised by how this has played out Charlie? You posed a what-will-happen-to-Canwest scenario out a couple of months ago. Do this many extensions alter that scenario, or do they only prolong the inevitable?

10 8Rating: +2

Weird

Aug 16, 2009 at 2:34pm

Charlie, do you think Canwest too valuable to powerful interests to allow it to die?

12 5Rating: +7

Charlie Smith

Aug 16, 2009 at 5:36pm

I decided to post a quick item here rather than an extensive analysis. But since you asked, here are my thoughts:

1. It's complicated dealing with Canwest's numerous creditors. The newspaper subsidiary, Canwest LP, is carrying more than $900 million in debt, and the company has stopped making payments. The other subsidiary, Canwest Media, owes more than $700 million. There is U.S.-denominated debt that goes up and down on the balance sheet with fluctuations in the U.S. dollar. Canwest has appointed a chief restructuring officer, who is grappling with all of these issues.

2. Compounding the complexity is the regulatory aspect. If Canwest finds a U.S. buyer for its newspapers, the advertisers in those newspapers won't be able to write off their expenses. That might require a legislative change.

3. Lurking in the background is Goldman Sachs, with whom Canwest partnered on the purchase of Alliance assets, including the specialty channels. Goldman Sachs has the movie distribution arm. But there have been reports that Goldman Sachs has a clause in its deal that would force Canwest to buy it out. If true, that creates another challenge for those trying to restructure the debt.

4. The newspaper advertising market is not bouncing back as quickly as Canwest executives might have liked. This could result in the hole getting deeper. Potential buyers, such as Torstar or a foreign company, might want to hold off, believing the price will be lower in a few months.

5. The community newspapers are also a problem on the restructuring side. It's questionable how much Canwest really needs to own the North Shore News, the Vancouver Courier, the Now papers, and the Delta Optimist, to name a few. But who is going to want to buy these papers when they're in dogfights, in some cases, with David Black's community papers? The logical buyer is Black himself, but he probably can't swallow the entire newspaper subsidiary without a lot of help from other financiers.

Over the medium term, here's my prediction: one metropolitan daily paper, one national daily paper, the Straight, possibly one commuter paper, and one community paper in every suburb, with the possible exception of Vancouver and Surrey. Many of the ethnic papers will also be around, though some might be knocked out as well.

8 9Rating: -1

Norman Farrell

Aug 16, 2009 at 6:02pm

Charlie. They are in a "soft receivership." Management has ceased to exercise control, the creditors are charge.

Do Canwest Global's broadcasting properties and newspapers still qualify as Canadian? All sides know the situation, the CRTC is negotiating and the creditors can't move any further without destroying Canwest Global's segments. Something must happen soon or the federal laws are meaningless.

seth

Aug 16, 2009 at 10:07pm

Canwest needs to stay in business long enough to babysit El Gordo through his GST, BCUC, and medicare cuts. By subsidizing Canwest/Gordo's losses Big BC Business gets to luxuriate in all the taxpayer lolly Gordo throws their way.
seth

9 9Rating: 0

"one metropolitan daily paper"?!?!

Aug 19, 2009 at 9:56am

Just great, Winnipeg will poke Vancouver in the eye by making The Province its signature daily paper.