Canwest's 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. 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 noteholders.

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

Tuesday's filing 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 other newspapers including this one, as well as associated online and mobile properties.

The publishing arm includes all of Canwest's newspapers, except the National Post. The major papers are the Times Colonist in Victoria, The Vancouver Sun and The Province, the Calgary Herald, the Edmonton Journal, the Leader-Post in Regina, the StarPhoenix in Saskatoon, the Windsor Star, the Ottawa Citizen, and The Gazette in Montreal.

However, 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.

Canwest president and CEO Leonard Asper 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," said Asper.

Rick Orzy, an insolvency lawyer at Bennett Jones in Toronto, described the plan put forward by Canwest as a "financial restructuring or a balance sheet restructuring" and it is "not trying to affect employees or suppliers."

He said by pre-negotiating in advance with its creditors, there is "virtually no way it won't pass the vote," which a court will hold among creditors to approve the restructuring.

He added a pre-packaged plan can also shorten the length of time the company is in creditor protection. He added "this type of filing will allow them to deal with the shares in a reasonably smooth fashion. You don't have to go through all kinds of hoops."

Under the proposed recapitalization plan, creditors including the eight per cent noteholders will receive common shares in the new Canwest in exchange for debt.

As a result, existing shareholders will see their stake all but wiped out. The company said Tuesday the entire common float in its current form will be reduced to just 2.3 per cent of the new company's equity. "This is a difficult day, and there will be people impacted," Asper said. "And for that we are regretful."

The Asper family will inject up to $15 million of its own funds into the holding company while it restructures. That investment will be in connection with another investment from a yet-to-be named Canadian investor for a further $50 million. All parties are expected to receive fresh equity in the emerged company in exchange for the capital.

Asper dismissed reports that CMI would seek the sale of any of its TV or other assets Tuesday. "There is no plan to sell assets off," he said.

"Our creditors see the strength of our businesses. … As I've mentioned, our television business alone generates hundreds of millions of dollars in operating profits, so we have a successful business," he said. "We had a bad balance sheet. That's being fixed. The business is poised to succeed."

The broadcaster and newspaper publisher 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 — the Canadian Radio-television and Telecommunications Commission — and the government to enable them to collect fees from cable and satellite companies in return for their signals.

The regulator has acknowledged the broadcasters' changing fortunes stemming from a combination of declining ad 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.