Leonard Asper
CanWest Global Communications Corp.'s television and newspaper assets will likely be sold separately as Canada's biggest media company moves to satisfy its lenders.
Buried under billions in debt, CanWest filed for bankruptcy protection Tuesday, telling a judge in Toronto it was now insolvent.
The Winnipeg-based company, which owns the Global Television network, more than a dozen daily newspapers across the country and several specialty TV channels, expects the court ordered restructuring of its debt will take four to six months.
The decision to file for protection under the Companies' Creditors Arrangement Act comes after a year of negotiations with creditors that saw CanWest no longer able to make interest payments on much of its $4-billion debt. The decision to file was made after a board meeting held late Monday.
CanWest's newspaper division, known as CanWest L.P., is in the midst of its own recapitalization talks, with a different set of lenders, led by the Bank of Nova Scotia. While these negotiations are ongoing, sources said CanWest LP will also likely need to file for creditor protection to complete its restructuring in coming months.
But at the end of the day, two distinct groups of lenders will end up as the new owners of CanWest's major assets. And since these creditors have little interest in operating a media company for the long term, they are expected to put television stations and newspapers on the auction block.
CanWest L.P. may start this process by announcing what is known as a stalking horse bid for its stable of papers at the same time it files for creditor protection, sources said, to put a floor price on its assets.
Nortel Networks used the same approach when it began to sell off divisions after filing for creditor protection earlier this year.
Several of the parent company's TV holdings are caught up in Tuesday's creditor filing, including a the national network - Global - and three specialty channels, MovieTime, DejaView and Fox Sports World.
CanWest co-owns a stake in 15 other specialty television channels, a division that is a partnership with the private equity arm of Goldman Sachs. This division has not filed for creditor protection, but is expected to eventually change hands.
Potential buyers of CanWest's specialty television stakes would include all of the company's domestic rivals, a list that includes Astral Media Inc., Corus Entertainment Inc., Rogers Communications Inc. and CTVglobemedia. For regulatory or financial reasons, most of these rivals would not bid on Global television.
Bidders for the newspapers - 11 dailies located across the country - are expected to include a management group, with potential interest in specific newspapers from regional publishers. For example, Torstar Corp. would likely look at CanWest L.P.'s two Ontario papers, the Ottawa Citizen and Windsor Star, as they compliment its existing stable of papers in southern Ontario. Debt-heavy Torstar is seen as unlikely to bid for the entire CanWest L.P chain.
The entire restructuring process is likely to see the Asper family's equity stake in the company drop below 10 per cent. It has not yet been decided whether the Winnipeg family, including CanWest CEO Leonard Asper, will retain some form of operational control of the business to appease Canadian ownership rules for broadcasting assets.
The company has $65-million of cash on hand from its recent sale of its Australian TV network and has asked the court to approve a debtor-in-possession financing of up to $100-million that will give its bondholders equity in the new company. Existing shareholders will be reduced to a 2.3 per cent stake in the company.
The process won't cause significant job losses, but "difficult decisions" mean some suppliers and past employees will be affected, Mr. Asper said in an internal memo.
The restructuring is being led by CanWest's bondholders, though the Asper family holds the voting shares in the company. As part of the agreement the Aspers will put in $15-million to the restructuring effort but will see their equity stake significantly diminished. The fate of the voting shares and that of Leonard Asper's role as CEO has not been finalized and will be decided in the restructuring in the next four to six months, a source close to the company said.
The company said Tuesday's agreement "represents the best alternative for the long-term interests of the CMI Entities, its approximately 1,700 employees, suppliers, customers and other stakeholders," CanWest said in a statement.
CanWest chief financial officer John Maguire and senior vice-president and general counsel Richard Leipsic appeared in a Toronto court room to make the submission. The company's shares were halted Tuesday and will likely be delisted.
In a memo to staff, Mr. Asper said the filing is designed to minimize disruptions on the daily operations of CanWest, and benefits and wages for employees will continue.
"This controlled and orderly financial restructuring plan will provide a renewed financial outlook for these business units and put them on a stronger footing for the future," Mr. Asper said.
Employees are concerned about their future, said Arnold Amber, director of the Communications Workers of America union in Canada which represents about 900 employees at five CanWest newspapers and the specialty channels.
"People are worried about not only their employment but ongoing commitments on pensions and things like that," he said. "It's an unsettling time across the board."
Mr. Asper said the company's $4-billion debt became too much to manage as the media sector became battered by a downturn in advertising.
"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," Mr. Asper said.
In total, CanWest said it needs at least $65-million of new equity.
"The family is at peace with these decisions. They have long since come to grips with what needs to be done at the company," said one source close to the Winnipeg clan.
The company has been struggling to reduce its debt load, which ballooned to about $4-billion this year. It sold its majority stake in Australian broadcaster TEN Network Holdings last month and will use the $634-million in proceeds to pay down debt.
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