Canwest debt picture darkens

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Canwest News Service archives Leonard Asper, CEO of the Canwest Global Communications Corp. (CNS)

Canwest Media Inc. and Canwest LP were both slapped with lower ratings and placed under further review by the Dominion Bond Rating Services on concern the broadcasting and publishing company won't be able to dig itself out from under its debts.

"DBRS believes that Canwest Media's financial flexibility is extremely limited as it is not currently in compliance with its bank covenants regarding its $300-million credit facility," the rating agency said in a release on Monday.

Canwest Media's rating was downgraded to CCC from B-high, while Canwest LP was shifted to CCC-high from BB-low -- both considered below investment grade.

Moody's Investors Service also downgraded Canwest Media Inc.'s corporate-family rating and probability-of-default rating to Caa3 from B3.

The corporate family's consolidated speculative-grade liquidity rating remains SGL-4, indicating poor liquidity, and the company's ratings outlook remains negative.

At the same time, ratings for Canwest and its two rated affiliates, CW Media Holdings Inc. and Canwest Limited Partnership, were also downgraded, the ratings agency said.

The latest revisions come just days after Canwest president and CEO Leonard Asper sent an internal memo to staff downplaying reports that the company is in financial strife.

"In all the media coverage what is often overlooked is that Canwest's businesses are highly profitable and generate well over $500 million a year in operating profits," he wrote.

"We are in the midst of a very structured process that has a number of checkpoints. Getting a financial agreement with our lenders is one of those checkpoints as is potentially selling some assets... reducing our cost structures and finding new sources of revenue."

DBRS said that Canwest is still talking to its bankers.

Canwest owns the Global television network in Canada, a chain of big-city Canadian daily newspapers and broadcast operations in several countries.

The company also owes about $3.9 billion in debt.

Asper told staff in the memo that the company needs to continue operating as usual.

"We still have to produce newspapers, web pages and television programs and these all need to be supported with advertising. From what I can see, we are doing this as well, if not better than anyone out there right now," he said.

Canwest is facing a downturn in advertising revenues spurred by a struggling economy, and the company recently cut 560 jobs, or about five per cent of its workforce.

To turn around its operation it's trying to sell its five E! network conventional television stations across Canada, and is cutting expenses throughout the company.

DBRS said the sale is "likely great enough to offset the company's operating pressure and put Canwest Media onside with its debt covenants."

Canwest has also said that it could put other assets up for sale in order to survive.

"The properties themselves, viewed separately from the financial debacle of the parent company, are actually fairly robust businesses that seem to be weathering the downturn as well as can be expected," suggested Carmi Levy, a media analyst at AR Communications Inc.

-- The Canadian Press

Charitable works

not affected: Asper

With the grim credit and economic environment sending Canwest Global Communications Corp. scrambling to meet its obligations, officials at the Asper Foundation are keen to report that all of its commitments will be met.

Gail Asper, president of the Asper Foundation, said Canwest Global's fortunes will not have any impact on the Asper family foundation's activities, in particular its involvement with the development of the Canadian Museum for Human Rights. She said the foundation has been capitalized separately from Canwest Global.

Foundation executive director Moe Levy, said it is making a $3.4 million payment to the museum in four weeks, bringing its contribution to $16 million.

Levy said all the foundation's activities will continue uninterrupted, including funding of the human rights and Holocaust studies program.

-- Martin Cash

Republished from the Winnipeg Free Press print edition February 24, 2009 B6