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Canwest puts newspaper division under court protection as prelude to a sale

Fri Jan 8, 12:59 PM
David Friend, The Canadian Press

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By David Friend, The Canadian Press

TORONTO - Canwest Global Communications (TSXV: CGS.V) has placed its cross-Canada newspaper chain under creditor protection and will put it up for sale next week, with a group of lenders led by the country's biggest banks ready to kick off the bidding.

The Winnipeg-based broadcaster and publisher of the National Post and big-city dailies and websites from Vancouver to Montreal said Friday it had reached a restructuring agreement with its creditors, mainly the company's bankers.

Under the deal, the banks agreed to make a "stalking-horse" bid setting the base price for an auction that could fetch more than $1 billion, according to some estimates.

"We have almost half of the secured lenders that are not only supporting a consensual financial restructuring, but that same group... is also prepared to put an offering in to purchase the full integrated publishing group," Canwest spokesman John Douglas said in an interview.

Like many North American media companies, Canwest was forced to seek protection from creditors last fall when the recession squeezed advertising revenues at its newspapers and TV stations. As well, $4 billion in debts piled up from earlier acquisitions produced mounting losses and made it impossible for Canwest to stay out of the red.

Canwest said the creditor protection filing Friday does not include the assets of the National Post, which escaped from CCAA last fall when courts allowed Canwest to shift the national daily into the larger newspaper division. However, the Post will be included in the sale.

Rumoured bidders for Canwest's newspaper group have included investment company Onex Corp. (TSX: OCX.TO), as well as some of Canada's largest pension funds and leveraged buyout firms.

In their own statement, the lenders including Canada's five largest banks and unidentified international financiers, said their bid will at least ensure Canwest's newspaper division continues as a going concern.

"After due diligence, it was determined there is value in acquiring the whole of Canwest LP's business, given the operating synergies that can be realized from a national chain of newspapers and online businesses," the lenders said, adding they would ensure a majority of the company's voting shares remain in Canadian hands while it goes through the auction process.

Douglas said that the company is already aware of some prospective buyers, though he declined to say how many might take part in the auction process.

"There has been interest, but no, we're not going to talk about it," he said.

Canwest has also arranged up to $25 million in financing from its senior lenders.

Canwest's Global Television operation was put under court protection several months ago, as was the National Post newspaper. Canwest later got permission to move the National Post as a separate legal entity to the larger newspaper division - amid a widespread expectation that all the publications would be sold.

Until Friday, Canwest's main newspaper division, and some other parts of its business, had been operating outside of creditor protection while the company and its major creditors worked on a deal to cope with billions of dollars of debt.

Canwest said putting the newspaper business under court protection was in the best interests of the company and the 5,300 employees at its publishing operations and will address the division's existing debts and protect its brands.

Besides the Post, Canwest owns major dailies such as the Montreal Gazette, Ottawa Citizen, Calgary Herald, Edmonton Journal, Victoria Times-Colonist and two Vancouver dailies, the Sun and Province.

Canwest's latest filing in an Ontario bankruptcy court also includes various community newspapers and a batch of news websites such as the Canada.com portal.

As with other media companies, Canwest has been affected by the recession's impact on sales of newspaper and television advertising, its main source of revenue. It was been nearly buried under a mountain of debt amassed over the past decade as it expanded beyond the original Global Television business by purchasing much of Hollinger Inc.'s Canadian newspaper business.