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After restructuring and refinancing, what’s next for Postmedia?

Postmedia has undertaken a series of drastic measures to reduce costs and free up the cash needed to make payments to its creditors.

Adrian Wyld/THE CANADIAN PRESS

Like an overly eager Christmas shopper reviewing holiday bills as the new year starts, Postmedia Network Inc. chief executive officer Paul Godfrey has resolved to spend 2013 paying down debt.

Everything Mr. Godfrey has done over the last year has been with the company's debt in mind. In fact, over the last fiscal year the newspaper publisher steered $108-million toward its creditors and brought the total amount owing to about $488-million.

That's not to say it was easy. To get there, Postmedia undertook a series of drastic measures to reduce costs and free up the cash needed to make the payments.

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It's no different than any other newspaper publisher in North America, in that it has seen revenue drop as advertisers find other ways to reach its customers. But Mr. Godfrey has been more aggressive than many in cutting costs, given the company's obligation to creditors.

The company has laid-off swaths of employees (spending $40-million in the last quarter alone on severance and buyout payments as it posted a $28-million loss). It shuttered its wire service, centralized many editorial functions in Hamilton, Ont., sold its headquarters, cut Sunday papers in some markets and even refinanced a chunk of its debt to get easier covenants.

All of that was the first phase of Mr. Godfrey's three-year plan to cut $120-million out of the company's annual expenses. The big question now is where Mr. Godfrey looks to cut costs next, now that some of his easier moves have been made and print revenues show no signs of coming back to previous levels.

Analysts (and employees) will be looking for those details when the company reports its first quarter results on Thursday, and holds its annual general meeting in Toronto. More real estate could be put on the block, and the company has shown a willingness to outsource functions such as printing that were once considered core to any newspaper operation but are now seen as expensive luxuries.

One thing is certain: Paywalls will be a part of the company's future. Already built around the Ottawa Citizen, Montreal Gazette, Vancouver Province and Vancouver Sun, Mr. Godfrey plans to lock up content at his other papers early this year (though he won't commit to specific timing just yet).

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