Francophone TV’s TQS gets protection from creditors in bankruptcy-court move

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This article was published 18/12/2007 (6576 days ago), so information in it may no longer be current.

MONTREAL – TQS Inc. obtained temporary court protection from its creditors on Tuesday in a bid to survive while the money-losing francophone TV network looks for ways to make the company more attractive to prospective buyers.

Five of the 30 companies recently approached by TQS’s advisors had signed confidentiality agreements. But none presented an offer, according to documents filed Tuesday as TQS sought protection under the Companies’ Creditors Arrangement Act.

TQS, which has failed to turn a profit for years, has been squeezed by a drop in advertising revenue as conventional television loses ground to specialty cable channels and the Internet.

The network of conventional television stations across Quebec is owned 60 per cent by Cogeco Inc. (TSX:CGO), a Montreal-based cable and broadcast company, and 40 per cent by CTVglobemedia, one of Canada’s largest media companies.

The company lost about $5 million in 2006 and owes $68 million including broadcast licensing fees.

TQS chief executive Rene Guimond told reporters Tuesday after the court filing was announced that TQS isn’t immediately planning layoffs or seeking concessions from its 600 employees.

“We have the firm intention now to find the business solutions that will ensure we can continue to play our role in Quebec television,” he said.

The network didn’t air its noon newscast so management could update employees about its situation.

Known largely for films, racy late-night television and sport commentary, TQS also airs the popular series Loft Story, a Quebec version of the U.S. hit Big Brother.

In a reference to an ongoing debate about whether conventional television stations get fees from cable and satellite companies that carry their signals, Cogeco CEO Louis Audet said “maybe this is an invitation for whoever has to consider a decision about fee for carriage for general television to think about it a bit more.”

Protection under the Companies’ Creditors Arrangement Act gives TQS time to reorganize its operations. The initial order will be in place for 30 days but court protection is usually extended if more time is needed.

“I think the intention when we moved to place the company under the protection of this act was to give it degrees of freedom so that it could in fact evolve into a long-term business model,” Audet told reporters ahead of Cogeco’s annual meeting.

“So that’s the intention in doing what we did this morning and cause all actors in generalist television to consider the issues at hand and make the changes that need to be made.”

TQS said its position in the Quebec francophone television market has deteriorated markedly despite special investments over the last several months.

The network directed the blame in several areas, including the gradual loss of advertising revenue to specialty TV networks, increased production costs and the federal regulator’s refusal to grant general-interest TV networks an equal ability to charge subscriber fees for signal distribution.

It also claimed to being negatively affected by the termination of an affiliation agreement for three stations with the French-language service of CBC, along with the public broadcaster’s strategy to act as a commercial player.

“TQS is a victim of circumstances beyond its control,” said Audet, who is chairman of TQS’s board of directors.

“However, other people besides ourselves – all TQS’s shareholders – have the required levers to bring about at a lasting solution. We are hopeful that they will seize the opportunity to make the necessary adjustments to save francophone general-interest television.”

TQS has five of its own stations – in Montreal, Quebec City, Saguenay, Sherbrooke and Trois-Rivieres – and four affiliates in Gatineau, Ottawa, Val-d’Or, Rouyn-Noranda, Rimouski and Riviere-du-Loup.

TQS also operates its own production house.

Meanwhile, Cogeco Inc., which also owns much of Cogeco Cable (TSX:CCA) has posted a guarantee for up to $12 million with CIBC (TSX:CM), which is also TQS’s banker, if TQS defaults on its own credit agreement.

The money could provide TQS a financial lifeline for up to about two months.

“Unless other unimaginable opportunities surface, this will mark our departure from television,” Audet said, noting it will have written off $80 million of its interest in TQS over the past two years.

In October, TQS’s board of directors hired CIBC World Markets to advise on strategic options amid its financial difficulties.

Under the order, RSM Richter Inc. has been appointed as monitor by Justice Pierre Journet of Quebec Superior Court.

Spokesman Gilles Robillard said the order gives TQS and itself greater flexibility to restructure or sell the operations or find a seller.

“There’s a lot of issues maybe to a purchaser in the past may not have been appealing … that we can solve through the restructuring process and deliver a package that is different than was being offered on the market three weeks ago,” Robillard told reporters.

On the Toronto stock market, Cogeco Inc. shares closed up $1.38 or 3.8 per cent at $37.47.