National Post transferred to Canwest’s publishing arm

TORONTO – The National Post will be transferred to Canwest’s publishing division along with the rest of its newspaper assets following court and lender approval Friday.

The Post, which turned 11 years old this week, will be part of Canwest Limited Partnership (LP), which operates 10 major-city dailies, two smaller-market dailies, 26 community newspapers and a host of Internet properties across the country. Previously, it was held by Canwest Global Communications Corp’s holding company Canwest Media Inc. (CMI), which also has Global Television and a number of specialty channels. CMI remains under creditor protection in order to reorganize its assets and satisfy debtor arrangements.

The Ontario Superior Court approval follows a filing requesting the transfer earlier this week. The move, which closes Monday, ensures a place for the Post within the Canwest newspaper chain. Contrary to some media reports in advance of the hearing, the newspaper is not about to cease publication.

The National Post and the other publications are "highly integrated and interdependent," Lyndon Barnes, a lawyer representing CanWest, told Justice Sarah Pepall during the hearing Friday in a Toronto courtroom.

Barnes noted that all of the parties representing creditors of Canwest were in support of the corporate reorganization.

In September 2005, Canwest announced a trust offering of a 26 per cent stake of its newspaper holdings as part of a bid to raise $1.45 billion. The CanWest MediaWorks Income Fund did not include the National Post because its financial situation at the time would have been viewed as a drain on the trust. Instead, it was transferred to the holding company for the parent, where it has resided pending resolution of the court-requested transfer.

The following month when the trust went public, Canwest raised $550 million. A year later, the federal government announced it would stop issuing advance tax rulings for potential income trusts and eliminate the tax-advantaged status of trusts by 2011, which significantly cooled investor interest in the investment vehicle. In May 2007, Canwest announced it was buying back the newspaper income trust for about $55 million less than the original sale price. The transaction was completed in July 2007, and the wholly-owned division was renamed Canwest Limited Partnership.

As CMI restructures with a view to emerge from creditor protection, the LP continues to operate as usual and is meeting current debtor commitments, after temporarily being in breach of loan covenants in the spring. The newspaper unit, which pulls in about $1 billion in annual revenue, holds about $1.5 billion in debt, much of that from the buyback of a 25 per cent stake in 2007 for just under half a billion dollars.

Canadian companies file for protection under the Companies’ Creditors Arrangement Act (CCAA) when they need time to negotiate with their creditors. During the time in which the company is under CCAA, its creditors cannot demand payment or take any action against the company. Debtors are generally allowed to keep possession of their assets under the control of existing management. Suppliers are paid for services provided.