Aspers losing grip on Canwest empire

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Nathan Denette / Canwest news service archives Leonard Asper may be removed as CEO when new financing found. (CNS NATIONAL POST)

The death watch on Canwest is full on now.

A bank syndicate that provides Canwest's operating line of credit had put the company on an allowance earlier this month with a deadline for a new deal at the end of this month.

The Globe and Mail reported this week that the company may have to seek bankruptcy or an equity infusion that would dramatically dilute the Asper family's control of the company.

Industry and Canwest observers have all but started the wake.

On Friday, Canwest shares lost another 17.5 per cent and closed at 35 cents, one penny above its all-time low.

Its desperate need for capital to pay down some of its $3.9-billion debt and service current payment levels -- at the same time that advertising revenue at its television stations and newspapers, as well as asset values, are declining -- has led many to speculate that however the capital is obtained it will invariably come with loss of control by the Asper family, the end of its multiple-voting shares and/or the removal of Leonard Asper as CEO.

Its small-market E! television stations are formally on the market. In an unusual move earlier this week, its Australian television operation, Network Ten, announced an equity offering and then pulled it the very next day.

Fairfax Financial Holdings Inc. already owns 22.41 per cent of Canwest's equity and the Globe and Mail reported that it may be seeking control. It reported that bankers close to the company suggest Fairfax or other investors (Canadian Press has reported that Onex Corp., run by the late Izzy Asper's former partner, Gerry Schwartz, may also be interested) would have to inject about $300 million to have an impact on the company's ability to stay out from under the mountain of debt.

There is some talk about the possibility that the Aspers could maintain control even with a new partner because of onerous benefit charges required by the regulators with a change of control of television assets.

A myriad of scenarios is still possible including that the Aspers may loose what has become the crown jewel of corporate Winnipeg.

A finance expert said, "If Leonard (Asper) does not have the discipline to sell this or that asset, rest assured that Prem Watsa (CEO of Fairfax) will be in there doing it."

There are probably no more determined or proud operators than the Aspers. Senior executives have decamped to Toronto to a war-room setting and word has already been sent to the offices of the premier and the mayor assuring them that previously promised financing for a new football stadium from the family's real estate company, Creswin Properties, will not be compromised regardless of how things shake out at corporate Canwest.

The family and the company's relative community profile may be another story.

There is already talk around town about what Winnipeg will be like without the Asper/Canwest creativity, initiative and leadership.

"Winnipeg has two families, the Richardsons and the Aspers," one senior Winnipeg business figure said. "Pretty soon there may be just be one."

The company has been famous for its complicated deals and corporate structures. Sources close to the company say there are not just one or two, but many options in dealing with the crisis.

"People are trying to get to the finish line but we are only one quarter of the way through the race," Canwest spokesman, John Douglas said. "It is a very structured process with checkpoints along the way. One of them is a financial agreement with the senior banks that includes everything from examining non-core assets, reducing our cost structure and recapitalizing the company. There are a number of options."

Late Friday, a source said it was likely that an operating line of credit will be re-established, perhaps with a lower ceiling.

Even if that first hurdle is cleared it will likely not alter the reality that the company will still, at the least, be forced to sell assets at the worst possible time.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition February 21, 2009 B8