Canwest holding company granted protection

TORONTO – Canwest Global Communications Corp.’s holding company has been granted creditor protection as it continues to work on a plan to recapitalize the country’s largest media conglomerate.

The voluntary filing and protection granted by the courts Tuesday under the Companies’ Creditors Arrangement Act (CCAA) will give Canwest Media Inc. (CMI) relief while it proceeds with restructuring plans and negotiations with senior lenders and debt holders.

CMI currently holds Global Television and some specialty channels, as well as the National Post.

The move does not affect Canwest Media’s stable of specialty channels acquired from Alliance Atlantis, nor TVtropolis, Mystery TV or Men TV. Nor does it affect Canwest Limited Partnership, which operates the company’s publishing arm – including all its newspapers except the National Post – as well as associated online and mobile properties.

Under the protection, CMI has received $100 million in debtor-in-possession, or DIP, financing to carry the affected business units through the restructuring process. On top of that, CMI has $65 million in cash. The "pre-packaged" plan has the approval of 70 per cent of CMI’s eight per cent note holders.

The terms of the filing also include the possibility of National Post being acquired by the LP, although it currently remains part of the holding company. "We’ll have more information about that in the coming weeks," Dennis Skulsky, president and CEO of the publishing division, said in a note to employees Tuesday.

Leonard Asper, Canwest president and CEO, said: "This pre-packaged financial restructuring is intended to minimize business disruption and preserve the value of these business operations."

"Because it has the support of the Ad Hoc Committee, we believe that we can use the stability offered by the CCAA to implement this plan in four to six months, which will renew the financial prospects of our operations and put Canwest on a stronger footing for the future," Asper said.

Canwest Global has been negotiating with lenders after CMI missed a $30.4-million US interest payment due March 15. The missed payment had the potential to trigger the payment of $761 million US of eight per cent senior subordinated notes.

Canwest’s debt was made more manageable following the sale last month of its majority stake in Australian broadcaster Ten Network Holdings Ltd. Between the $634 million received for Ten and the elimination of associated debt, Canwest was able to wipe $1.2 billion in debt from its books, primarily at CMI. Previous to the sale of Ten, the company held $3.8 billion in total debt across all divisions.

Global and other large broadcasters such as CTV and the CBC have been shedding staff and cutting programs to deal with shrinking advertising revenue and the migration of audiences to the Internet and specialty broadcasters. The broadcasters have also been lobbying the federal broadcast regulator and the government to enable them to collect fees from cable and satellite companies in return for their signals.

The Canadian Radio-television and Telecommunications Commission has acknowledged the broadcasters’ changing fortunes stemming from a combination of declining advertising revenues, slumping profitability, loss of audience and the need to switch from analog to digital transmission. As a result, the CRTC will consider the issue in hearings planned for December.

In addition to changing viewing and reading habits among Canwest’s traditional customer base, the recent onset of a recession in Canada has had a major effect on the company’s bottom line. In April, after writing down the value of its publishing assets, Canwest reported a second-quarter loss of $1.44 billion. This followed on a $1-billion writedown of its broadcast licenses and conventional television in November, which was blamed on soft advertising markets combined with “structural and regulatory challenges.”

In July, Canwest reported a third-quarter loss of $110 million, again on writedowns associated with the LP.

"Like all media companies, Canwest’s financial performance has been adversely affected by current economic and financial market conditions, including a precipitous and unprecedented decline in advertising revenues. There is no doubt that in this environment, Canwest had too much debt," Asper said in a note to employees Tuesday.

"However, you should not confuse operational excellence with our balances sheet issues."