October 21, 2018

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Canwest restructuring begins

Likely start of dismantling of once-mighty media empire

Hey there, time traveller!
This article was published 6/10/2009 (3301 days ago), so information in it may no longer be current.

Tuesday morning officially marked the end of the era of the Asper family's ownership of Canwest Global Communications Corp. and its dominance atop the Winnipeg corporate landscape.

A drawn-out process to restructure the company that had been in the works since early spring and may ultimately mean the dismantling of the largest media company in the country has formally begun.

All was quiet Tuesday at the company's corporate headquarters in Winnipeg where about 25 people still work compared to about 50 at its peak a couple of years ago.

Canwest Global occupies the top four floors of 33-storey Canwest Global Place at Portage and Main. A receptionist was the only person present in the 31st-floor reception area, which boasts plush wall-to-wall carpeting, dark-brown woodwork, and floor-to-ceiling windows overlooking the downtown.

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Hey there, time traveller!
This article was published 6/10/2009 (3301 days ago), so information in it may no longer be current.

"Like all media companies, Canwest's financial performance has been adversely affected by current economic and financial market conditions, including a precipitous and unprecedented decline in advertising revenues. There is no doublt that in this environment Canwest had too much debt," CEO Leonard Asper said in a memo to staff.

CNS

"Like all media companies, Canwest's financial performance has been adversely affected by current economic and financial market conditions, including a precipitous and unprecedented decline in advertising revenues. There is no doublt that in this environment Canwest had too much debt," CEO Leonard Asper said in a memo to staff.

Tuesday morning officially marked the end of the era of the Asper family's ownership of Canwest Global Communications Corp. and its dominance atop the Winnipeg corporate landscape.

A drawn-out process to restructure the company that had been in the works since early spring and may ultimately mean the dismantling of the largest media company in the country has formally begun.

All was quiet Tuesday at the company's corporate headquarters in Winnipeg where about 25 people still work compared to about 50 at its peak a couple of years ago.

Canwest Global occupies the top four floors of 33-storey Canwest Global Place at Portage and Main. A receptionist was the only person present in the 31st-floor reception area, which boasts plush wall-to-wall carpeting, dark-brown woodwork, and floor-to-ceiling windows overlooking the downtown.

She said no one was available to speak to media or to comment on the mood among head-office employees. It was the same story at the company's Winnipeg TV station, one floor below. A station official who was summoned from the back, deflected media inquiries to Toronto.

The holding company was voluntarily placed in bankruptcy protection in an Ontario court Tuesday morning with a plan for the debt-holders to convert their $761 million worth of bonds into shares as had long been expected.

Existing shareholders — including the Asper family's 56 per cent stake that was once worth $1 billion — will receive only 2.3 per cent of the shares of the restructured company.

The TSX is already considering delisting Canwest shares.

The Companies' Creditors Arrangement Act (CCAA) filing on Tuesday only places the holding company, the Global Television network, three specialty channels and the National Post newspaper in bankruptcy protection.

But analysts said they believe its future ownership of 10 major-market newspapers, several community papers and its stable of 17 profitable specialty channels is also in doubt.

Chris Diceman, a debt analyst at DBRS, said, "This is a company that was just too highly leveraged. Frankly, a recapitalized company would be able to compete better — albeit it is likely to be unbundled."

Tuesday's prepackaged CCAA filing — where the majority of the creditors have already agreed to the terms and conditions — means there will be no disruption to the operations of its companies.

Canwest spokesman John Douglas said, "The path that is to be followed has the support of the major creditors. It allows us to move quickly. The key principle in which the restructuring plan was developed was to minimize business disruption and preserve the value of the business."

In a message to staff on Tuesday morning, company CEO Leonard Asper said, "I know that this may create some personal anxiety but we are confident that these businesses will emerge more stable, competitive and ready to take advantage of the Canadian economy as it begins to improve."

The Asper family's commitment and loyalty to Winnipeg, while most of the Canadian media establishment clustered in Toronto, left their and the Canwest company's name adorning institutions throughout the city including the Portage and Main office building that houses the corporate head office, Canwest Global Park, the Canwest Performing Arts Centre and the Asper Jewish Community Campus.

Many have said they believe the family and its businesses have been the driving force behind what has been a renaissance of sorts for Winnipeg over the last 10 years.

That was underscored by a $20-million donation to the Canadian Museum for Human Rights by the Asper Foundation and tireless fundraising and promotion by the family for what will become the country's first national museum outside Ottawa.

But increasing fragmentation in the media industry coinciding with a recession, financial crisis and credit crunch left the over-leveraged company unable to meet onerous interest charges on close to $4 billion in debt.

The sale last month of its 50 per cent stake in the Australian television station, Network Ten, knocked almost $1 billion off the total and analysts said that likely got the ball rolling for Tuesday's formal filing for bankruptcy protection.

The CCAA plan allows for the Aspers to reinvest up to $15 million in new cash as part of an effort to raise $65 million in new equity from Canadian investors.

That may be partly an effort to maintain 80 per cent Canadian ownership levels as required by their television licence agreement with the CRTC.

The complicated CCAA filing — with hundreds of pages of documents filed in court Tuesday — befits the complicated structure the company has always maintained.

Its newspaper holdings and most of its speciality television stations still remain as assets owned by Canwest — 100 per cent of the newspapers and 35 per cent of the specialty channels — but they, too, suffer under crippling debt levels and many say they believe they may ultimately experience the same fate at the holding company.

Rumours were already circulating that Paul Godfrey, Toronto Sun founder and former member of the Canwest board of directors, is putting together a group of investors to buy the newspapers for $1 billion.

The Asper family fortune had been decimated by the voluntary bankruptcy protection deal, but the family still owns a real estate development company called Creswin Properties, which is planning a 600,000-square-foot retail development at the site of Canad Inns Stadium.

Some observers said it is likely that Leonard Asper would be able to raise $15 million in cash to reinvest in the company, but more than that may be a struggle.

"They certainly don't have $100 million," said one source close to the family.

Depending on several other elements of the restructuring, analysts said they expect it will likely leave the Aspers with a small stake in the new company — something less than 10 per cent.

Few analysts said they believe Leonard Asper will remain as CEO.

— with files from Murray McNeill

martin.cash@freepress.mb.ca

Martin Cash

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

Read full biography

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