CanWest Global Communications Corp. took a major step forward in paying down debts yesterday by selling its controlling stake in an Australian television network yesterday for $634-million, but still faces a drawn-out restructuring that will offer little to its stockholders.
CanWest sold its majority stake in Ten Network Holdings Ltd. to an Australian investment bank - which in turn moved the stock to clients - parting with what was once considered one of the Canadian media company's crown jewels.
The cash raised from the sale is earmarked for paying back a number of lenders as CanWest negotiates a larger restructuring.
In selling the Ten stake, CanWest also bid farewell to $580-million of debt that was on the Australian company's balance sheet.
While CanWest stock jumped 8 cents a share to close at 20.5 cents on the Toronto Stock Exchange yesterday, analysts and media executives said there is little chance the company's equity will have any value when its recapitalization is finished.
The Winnipeg-based company, which is controlled by the Asper family, now has a market capitalization of $35-million.
"While we acknowledge this represents an important milestone in the recapitalization of CanWest, we remain of the view that there is little or no residual value in CanWest shares," said a report yesterday from BMO Nesbitt Burns analyst Tim Casey, one of the few analysts who still follows the company.
Mr. Casey estimated that after the TEN sale, CanWest still owes creditors $2.5-billion.
With Ten now out of the fold - Macquarie Capital Advisers Ltd. purchased the stock - CanWest continues to work on larger restructuring issues, which include the possibility of a debt-for-equity swap, or the repurchase and retirement of the company's bonds at a discount to their face value.
Bond traders say CanWest debt that was changing hands for less than 20 cents on the dollar late last year, during the credit crunch, is now trading at 60 cents on the dollar.
No further asset sales are expected until the recapitalization is complete, sources say, as creditors recognize a recession is not the best time to auction off television and newspaper companies.
The basic terms of the overall recapitalization are expected in the next few weeks. One source close to the company said: "The focus is on an orderly restructuring. No one wants to undermine the value of CanWest's operating units by introducing more uncertainty into these businesses."
If CanWest's owners do decide to sell more divisions, domestic rivals such as Corus Entertainment Inc., Astral Media Inc. and Rogers Communications Inc. are expected to bid for parts or all of CanWest's portfolio of specialty television channels, which are co-owned with the private equity arm of Goldman Sachs & Co.
The money raised from the Ten sale will be used to retire $95-million (U.S.) of bonds that paid 12-per-cent interest and were issued by CanWest subsidiaries.
The company also set aside $426-million for owners of bonds that pay 8-per-cent interest. The company will retain $85-million (Canadian) for general corporate purposes.
The Australian acquisition was one of the best deals CanWest's late founder Izzy Asper ever made.
Acquired for $45-million in 1992, Ten produced profits that helped fuel the company's broadcasting operations back home. Since 1992, Ten has paid out $950-million in dividends to its Canadian parent.
CANWEST (CGS)
Close: 20.5¢ (Cdn.), up 8¢
Andrew Willis