UPDATED: Canwest Watch

The company’s newspaper division says it won’t make a $10 million payment to bondholders

CanwestThe media company behind the Global television network, and the country’s biggest chain of daily newspapers, is racing to restructure its prodigious debt load. With another key deadline on Feb. 27 March 11 April 7 April 14 April 21 May 5 May 19 June 15, and the stock changing hands for nickels a share, the question remains whether Canwest can avoid filing for bankruptcy, and whether the Asper family can maintain control of the empire their father, Izzy, created. Signs continue to point to a dire outcome for Canwest shareholders, but the Asper kids want to reassure everyone: don’t worry about them, they’ll be just fine.

Bloomberg, May 29, 2009: Canwest says it won’t make a $10 million payment to bondholders due today in effort to give its newspaper business more time to refinance its debt. Its failure to make the payment will put the Canwest Ltd. Partnership division, which owns 12 dailies, in breach of its debt covenants on May 31. Managers are in talks with lenders, as failure to make the payment would trigger a default on the notes.

Reuters, May 20, 2009: Canwest annnounced it has negotiated $175 million in new financing with its creditors. The embattled media empire says it has buyers for $100 milion in 12 per cent senior secured notes and that it has negotiated a $75 million asset-based loan with CIT Business Credit Canada Inc. The company’s senior lenders have agreed to defer payments worth around $10 million until June 2 in order for the new financing to be arranged, while its noteholders postponed yesterday’s deadline for a recapitalization transaction to June 15.

The Globe and Mail, May 16, 2009: As part of it continuing effort to shed non-core business assets, Canwest has sold off its Turkish radio business. Terms of the sale were not disclosed, but Canwest’s 20-per-cent stake in Spectrum Medya was estimated to be worth $12.2-million when the deal was completed four years ago.

The Globe and Mail, May 11, 2009: Canwest may be considering as many as four proposals from investors interested in participating in a recapitalization plan. Fairfax Financial, Onex Corp., Brookfield Asset Management and an unnamed Australian private equity investor are all rumoured to be considering playing a role in the restructuring, which is expected to involve swapping to debt for equity in the company.

CBC, May 6, 2009: Canwest has come to terms with its bondholders on another two-week extension (to May 19) for a $30.4 million interest payment on $761 million worth notes. In the meantime, creditors have agreed not to demand immediate repayment of the principal and will extend further credit to the company.

The Globe and Mail, April 30, 2009: Canwest has announced it will not publish a Monday edition of the National Post throughout July and August in a bid to reduce costs. The suspension of the Monday issue will begin July 6 and end September 14, affecting nine print runs in total.

The Globe and Mail, April 28, 2009: According to Canwest CEO Leonard Asper, Canada’s regulatory framework, rather than the debt his company is carrying, is responsible for the broadcaster’s economic woes. “The financial markets take a dim view of this sector in part because our only source of revenue, advertising, is in decline, and we operate in an unfavourable regulatory environment,” Asper told CRTC officials. “In fact, both auditors and stock market analysts now attribute little or no value to our conventional operations. Short-term fixes will not turn the tides. If we had no debt, we would still be before you advocating the same necessary changes.”

The Globe and Mail, April 27, 2009: For the first time since conventional broadcasters began lobbying for the introduction of carriage fees, the CRTC has released its own estimate of how much money such a plan would generate. At 50 cents per month per subscriber—a proposal put forward by CTV and Global—carriage fees would bring in $352 million to the conventional broadcasters. The introduction of carriage fees would be a boon for Canwest and the mere possibility of it happening could be among the reasons the company’s creditors have resisted pushing it into bankruptcy.

Variety, April 24, 2009: Despite its financial woes, Canwest is still expected to be a big buyer of U.S. television shows at the upcoming May Screenings in Los Angeles.

The Globe and Mail, April 22, 2009: Following a late night of negotiations, senior lenders agreed to extend the waiver on certain borrowing conditions until May 5.

Reuters, April 20, 2009: Canwest is facing yet another deadline to pay out $30.4 million in interest to creditors holding $761 million worth of the company’s debt. Last week, noteholders agreed to give Canwest up to April 21 to make the payment after it missed an earlier March deadline to do so. Unless Canwest makes the payment or obtains another extension, noteholders could call in the loan in its entirety.

The Globe and Mail, April 16, 2009: Prem Watsa, the CEO of Fairfax Financial Holdings Ltd, says he regrets investing in the newspaper business, citing the declining fortunes of Torstar and Canwest as particularly harrowing examples. “We should have been a lot more careful,” Watsa said, “both about the newspaper business as well as the ability of management to navigate” the economic crisis. Fairfax owns 22 per cent of the non-voting shares of CanWest and 18 per cent of Torstar, but has already written down most its media-related investments.

Financial Post, April 14, 2009: Lenders give Canwest Media Inc. a one-week extension on a US$30.4 million interest payment originally due March 15.

Reuters, April 13, 2009: Canwest shares have “no residual value,” BMO Capital Markets analyst Tim Casey wrote to clients on Wednesday, and “it seems unlikely to us that Canwest can continue in its current form.” Casey wasn’t the only analyst warning investors to stay away from Canwest as it approached a Tuesday deadline to make a $30.4 million interest payment to bondholders. Moody’s Investors Service said “it appears inevitable” Canwest will miss the key payment; National Bank Financial analyst Adam Shine wrote that there is “no compelling reason to own, let alone buy Canwest shares, which we would continue to avoid;” and GMP Securities analyst Jason Jacobson warned that “we believe Canwest equity value is very limited,” adding that his target price for the share is zero. Canwest shares closed at 25 cents on the Toronto Stock Exchange on Monday, a record low.

Sydney Morning Herald, April 13, 2009: Canwest has until Tuesday to make a US$30.4 million interest payment to noteholders. The company missed last month’s original deadline to make the payment; missing it again could leave Canwest owing noteholders the entire US$761 million principal. Canwest representatives have reportedly been negotiating with noteholders in an effort to get an extension and have warned that, should noteholders request a payment worth the entire debt, “we believe that Canwest Media would not have sufficient liquidity to satisfy any such demand.”

Winnipeg Free Press, April 11, 2009: Free Press columnist Martin Cash puts forth the most stark outlook for Canwest yet, concluding that it’s “inevitable” that the Canwest empire will soon be broken up, and the Aspers will lose control of the company. According to Cash, the decline in advertising revenue from Canwest’s publishing assets has the company on the verge of breaking another debt covenant, this one worth $1.4 billion. The best case scenario now, in the opinion of one analyst Cash spoke to, would see Canwest shedding its specialty television channels, its newspapers and its Australian assets to
return to its roots as a conventional television company.

Canwest News Service, April 10, 2009: In a conference call with analysts, Canwest executives said they will continue to pressure the government and the CRTC to correct what they described as a “structural imbalance” in Canada’s broadcast industry that disproportionately benefits cable and satellite operators to the detriment of local broadcasters. According to Canwest president and CEO Leonard Asper, only three of the company’s 16 local television stations turned a profit last year. Still, Asper was optimistic about the future, saying his company continues to “outperform the industry in several areas including audience growth. At the same time, our focus on reducing costs while transforming the business should position us to take advantage of a growing advertising market as the economy begins to improve.”

CBC, April 9, 2009: Canwest announced it lost a staggering $1.4 billion in the second quarter, up sharply from the $33.9 million it lost in the same quarter last year. The loss included a $1.19 billion non-cash writedown of its assets prompted the grim economic outlook and a shrinking stable of advertisers. Its newspapers alone have lost more than half their value in the last year, down $895 million to $788.1 million.

The Globe and Mail, April 8, 2009: Canwest has two major problems on its hands as it tries to sell assets to meet debt repayment deadlines: the assets have substantially declined in value, meaning their sale prices won’t be enough to dig the company out from under its massive debt; and Canwest’s corporate structure is making it difficult to finalize the sales. As a result, sources say they’ve effectively stopped pursuing buyers.

Canadian Press, April 8, 2009: The federal government is reportedly considering extending a $150 million lifeline to struggling Canadian broadcasters, including Canwest. The topic came up at a meeting of the cabinet priorities and planning committee this past Tuesday and follows months of lobbying by Canwest and Quebecor, among others, for government assistance. The proposed fund would be aimed at supporting local news and current affairs programming and would include mechanisms to prevent large urban centres like Montreal, Toronto, and Vancouver do not swallow up the money.

Reuters, April 7, 2009: Canwest Media Inc. and its senior lenders agreed to extend talks until April 21 on “certain borrowing conditions.” The company still has a US$30.4 million interest payment due on April 14.

Reuters, April 6, 2009: Aside from Tuesday’s deadline to renegotiate the terms of a credit facility with senior lenders, Canwest is also looking at having to come to terms with the company’s noteholders, who hold $761 million worth of the company’s debt. Canwest missed a $30.4 million interest payment on the notes last March 15; should it fail to make the payment by April 14, bondholders could demand that the entire amount of the principal be repaid. According to Canwest, successful negotiations on both fronts would allow the company to pursue a recapitalization transaction. Canwest has been shedding assets in a bid to stay afloat. So far, however, it has failed to unload any assets that would allow for a significant reduction of its debtload. Meanwhile, analysts have speculated that Fairfax Financial Holdings, which owns 22.4 per cent of Canwest’s subordinate voting shares, could step up with a refinancing proposal.

Sydney Morning-Herald, April 6, 2009: An editorial in the Sydney Morning-Herald laments Canwest’s seemingly “impossible debt burden” of $3.7 billion, concluding that “the solvency of [the Ten Network’s] parent company appears to be a lost cause.” The Morning-Herald says the “high-debt model” Canwest used to build its empire is “about to create roadkill on the information superhighway.”

Canadian Press, April 5, 2009: Yet another debt-related deadline is looming for Canwest. The struggling company has until Tuesday to come to terms with lenders on a senior credit facility. Chris Diceman, a senior vice president at credit-rating agency DBRS, says the banks will want to “make sure the company is making progress on selling assets or getting additional capital,” but Diceman suspects they “will be willing to help in some fashion.” Canwest also needs to come up with the necessary funds to make an interest payment on the US$761 million it owes to bondholders by April 14. The payment was initially due last month, though analysts believe Canwest will successfully push for another extension.

The Globe and Mail, April 3, 2009: Australia’s Canwest-owned Ten Network has announced it will not be handing out dividends to its parent company, putting yet another squeeze on Canwest’s cash flow. The Ten Network’s revenue was down 11 per cent over the first six months of its fiscal year and the broadcaster reported $70 million in losses over the same period. Last year, Ten paid out $125 million in dividends, with $60 million going to Canwest. Analysts say the cancellation of dividend payments could force Canwest to sell the once-profitable television network as it approaches an April 14 deadline to pay $761 million for outstanding notes.

CBC, April 3, 2009: Canwest Global Communications Inc. executive vice-president David Asper has agreed to commit $100 million to the construction of a new stadium for the Winnipeg Blue Bombers. The federal and provincial governments, meanwhile, will kick in $15 million and $20 million, respectively, to the project, which is expected to be completed for the start of the 2011 CFL season. In exchange for the funding for the stadium, Asper will become the sole owner of the Blue Bombers franchise, which is currently community-owned.

Halifax Chronicle-Herald, March 30, 2009: Canwest announced it would put off making a decision on whether to close struggling local TV stations until the end of the summer. The media conglomerate had originally set a March deadline to either sell, restructure or shutter its five E! Network  stations in Montreal, Hamilton, Victoria, Red Deer, and Kelowna. But Canwest says it recently got some nibbles from potential buyers, leading it to postpone the deadline.

Canadian Press, March 19, 2008: According to a report by Canadian Press, Ottawa hasn’t ruled out providing some form of assistance to Canwest. Though Heritage Minister James Moore wouldn’t reveal any details about the government’s plans, he hinted aid could come in the form of regulatory changes or changes to the tax code. “We’re a low-taxation government that does not believe in over-regulating industries that are struggling,” he said. Along with rival broadcasters  CTVglobemedia and Quebecor, Canwest has reportedly been lobbying Prime Minister Stephen Harper’s office for help as the entire sector struggles to cope with a sharp decline in ad revenues.

The Australian, March 18, 2009: Canwest is denying reports its 56.6 per cent stake in Australia’s Ten network is on the block. But that doesn’t mean potential buyers haven’t already started working on their offers. According to a report in The Australian, an investment banker claims “opportunistic” proposals are being “cobbled together” by investors looking to scoop up Canwest’s share in Ten at a bargain price.

Hamilton Spectator, March 18, 2009: Hamiltonians are mounting a campaign to save the city’s beleaguered, Canwest-owned local TV station, CHCH. About 100 supporters staged a rally on Tuesday calling on the CRTC to prevent it from closing. Canwest has put the station up for sale as part of its plan to shed non-core assets, but it could be shut down entirely should the company prove unable to find a buyer. Some locals have even suggested that CHCH be converted to community ownership.

Canadian Press, March 12, 2009: Canwest has received $34 million from Sun-Times Media Group Inc. in connection with a settlement awarded by an arbitrator last January. The settlement resolves a dispute between the Canadian company and Hollinger International (now Sun-Times) over the accounting methods used when Canwest purchased the Southam newspaper chain in 2000. Canwest has already said $30.5 million of the award will be used to top up the company’s cash collateral for the senior credit facility it has been renegotiating in recent weeks, while the remaining $3.5 million will go to Canwest Publications Inc., a subsidiary of Canwest Limited Partnership. The initial award was worth $50.7 million, however both companies say the $34 million payment settles the matter.

Reuters, March 11, 2009: Canwest Media Inc. was granted another extension to a waiver of loan conditions, this time to April 7. The media conglomerate announced last month that its senior credit facility had been cut from $300 million to $112 million, $92 million of which had already been drawn down. An original extension had given Canwest until March 11 to revamp the conditions of the credit facility. The company continues to make transactions aimed at raising cash. It recently sold The New Republic magazine, and has unwound certain hedging contracts that resulted in a net gain of $105-million. Canwest also announced it would not make a $39 million interest payment that had been due on March 15; according to Canwest, creditors cannot demand for payment of the principal amount of $982 million, so long as the interest is paid by April 14.

Canadian Press, March 10, 2009: As part of its continuing efforts to shed what it deems “non-core assets” Canwest has sold The New Republic magazine to a group of investors that includes its editor-in-chief, Martin Peretz. Terms of the sale were not disclosed. Although terms were kept similarly hidden when Canwest purchased The New Republic from a group that included Peretz in early 2007, it’s believed the company paid about $9 million for the prestigious political magazine.

The Age, March 9, 2009: Canwest’s 56.6 per cent stake in Australia’s Ten network could be at risk, given that the media company’s borrowings are secured against assets that include the television network.

Canadian Press, March 2, 2009: Analysts say the two-week extension Canwest has agreed to with its creditors suggests the company has some asset sales already lined up. But even if that’s the case, there’s no sign the financial storm Canwest finds itself in has passed. The company will likely need more extensions in the future, observers say, if only because its creditors don’t want to be stuck chasing after the money they’re owed. “You’re going to see a series of deadlines met, extended, adjusted and modified because the banks don’t want to own the (Canwest) business,” a media analyst who asked to remain anonymous told Canadian Press. Canwest has already put its five E! network television stations up for sale and it’s believed the fire sale could eventually include its flagship newspaper, the National Post, and its lucrative specialty cable channels.

The Hill Times, March 2, 2009: NDP MP Charlie Angus is worried a possible bankruptcy filing by Canwest would leave Canada’s media landscape even more concentrated than it already is. “We can’t allow any more media convergence,” Angus told The Hill Times. “[The regional entities] can’t just get gobbled up by the few remaining giants.” Angus says the federal government should draft an “action plan” to save the regional properties owned by Canwest to prevent them from being taken over by a rival conglomerate. Liberal Sentator Jim Munson echoed Angus’s concerns about increased media convergence and lamented that the recession makes it near impossible for private investors to pick up where Canwest would conceivably leave off. “Right now,” he said, “the banks don’t seem to be in the mood to lend local business people the money needed to restart or start up a small newspaper, so I’m not as optimistic as I would be if we weren’t living in a recessionary time.”

The Globe and Mail, March 2, 2009: Canwest is expected to plead with the CRTC this week for sweeping changes that would give its television stations more leeway when it comes to programming decisions. In a filing with the government agency, Canwest rival CTV told federal broadcast regulators that, even after the recession, it doesn’t “expect revenues to return to previous levels given long-term trends” and that it’s anticipating losses of about $100 million for this year alone. The private broadcaster suggested the only way to stem the wave of losses was to overhaul Canada’s regulatory regime, a suggestion Canwest is expected to echo in its own filings.

Reuters, Feb. 27, 2009: Canwest has agreed with its lenders to extend negotiations on a credit facility until March 11. Both sides have also agreed to permanently reduce Canwest Media Inc.’s borrowing limit to $112 million. (The limit was initially cut in early February from $300 million to $20 million above the $92 million Canwest had already borrowed.) The company says it expects to have enough cash to carry it through to the new deadline. But in the meantime, it plans to further explore ways to reduce costs and divest of non-core operations and assets.

Reuters, Feb. 27, 2009: Ottawa has no plans to help the country’s fledgling media sector, Finance Minister Jim Flaherty told BNN television on Friday. Asked specifically about Canwest’s prospects for government aid, Flaherty said, “I haven’t heard from them. I’d certainly listen to them. But, no, we don’t have plans to create packages for various industries in Canada that are going to suffer during the recession.”, Feb. 26, 2009: Federal Heritage Minister James Moore told Vancouver’s Georgia Straight that he’s “had conversations with Canwest as they’ve updated me about the challenges that they’re facing.” Moore added that the government hopes “they make it through it as best as possible with as solid a news organization across the country as possible with a number of well, you know, the highest number of employees to taken care of.” However, Moore wouldn’t speculate on whether Ottawa might loosen media ownership rules to allow a foreign investor to step in and save the media conglomerate. Under the current legislation investors from abroad are forbidden from holding more than 20 percent of an operating company in the Canadian communications sector, or 33 percent of a holding company.  In response to the suggestion a foreign media baron—like Rupert Murdoch, for example—might express an interest in owning Canwest, Moore characterized the scenario as “a hypothetical on top of a hypothetical.”

Reuters, Feb. 26, 2009: CIBC World Markets analyst Bob Bek told Reuters on Thursday that Canwest might be able to buy itself a bit of time, provided it’s able to convice its creditors it can make good on its debt payments. Bek says he thinks the Friday deadline for Canwest to restore its borrowing capacity is “a softer deadline and that it is easily extended if Canwest has enough concrete ‘works in progress’ to ease concerns,” Bek said. “The banks don’t want to force this prematurely.”

The Globe and Mail, Feb. 26, 2009: Sources have told the Globe that Canwest will need a major financing deal, worth “at least a few hundred million dollars,” if it hopes to avoid filing for creditor protection. Such a deal would take several weeks to negotiate, though Canwest CEO Leonard Asper has reportedly already begun canvassing potential lenders and investors.

Canadian Press, Feb. 25, 2009: Canwest is shedding its minority  stake in the sports channel The Score, selling its shares back to the broadcaster’s parent company. The cash-strapped media conglomerate has already sold 16.6 million shares back to Score Media Inc. for $6.62 million and has retained the services of Genuity Capital Markets to shepherd the sale of its remaining nine million shares. In all, the sale is expected to top up Canwest’s coffers by more than $10 million.

Ottawa Business Journal, Feb. 25, 2009: Canwest will no longer be involved in the publication of two Ottawa-area community newspapers. As of March 2, The Now EMC Ottawa East and The Now EMC Ottawa-Orleans will be owned entirely by the EMC Community Newspaper Group, which had entered into a partnership to publish the papers with Canwest in April 2007.

The Globe and Mail, Feb. 24, 2009: Leading credit rating agencies Dominion Bond Rating Service (DBRS) and Moody’s are getting increasingly worried about Canwest’s long-term prospects. DBRS now predicts the company’s creditors can expect to recover around 90 cents on the dollar should Canwest file for bankruptcy protection-down from its projection last December that creditors would likely recover the entire debt. Moody’s, for its part, is reporting that Canwest is seriously hamstrung by “very weak financial results and [a] lack of financial flexibility.” The media conglomerate is currently trying to re-work the terms of a credit line extended to subsidiary Canwest Media that was trimmed from $300-million to $112-million earlier this month. The waivers the banks had granted on the loan will expire on February 27 and DBRS reports that, should Canwest be unsuccessful in renegotiating the debt facility, Canwest Media, “would be in a default position.”

Winnipeg Free Press, Feb. 24, 2009: Despite the ongoing financial troubles at the Asper-owned Canwest Global, Gail Asper, president of the Asper Foundation, said the charitable foundation’s activities remains unaffected by the turmoil. According to Asper, the foundation’s finances are separate from those of Canwest Global, and its director, Moe Levy, says are there are no plans to shelve an upcoming $3.4 million payment to the Canadian Museum for Human Rights., Dec. 8, 2008: Members of the Asper family have fallen off Canadian Business magazine’s list of the country’s 100 wealthiest people after losing some 60 per cent of their fortune. Collectively, Leonard, Gail and David Asper lost close to $500 million in 2008. “I don’t pay any attention to that nonsense,” David Asper was quoted saying in response. “Those folks really don’t know what our business affairs are, because a lot of it’s private.”

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