Sometimes corporate synergy gets you a front row seat.
Canwest gains time in debt reworking
Deadline March 11
Grant Surridge, National Post
Saturday, February 28, 2009
Canwest Global Communications Corp. secured a two-week reprieve late yesterday to continue negotiating the terms governing its debt covenants.
The Winnipeg-based publisher and broadcaster said in a press release it will continue discussions with its senior lenders to extend a $112-million line of credit beyond March 11.
In the meantime, the company said it has enough money to continue financing its daily operations.
"Based upon cash on hand and current cash flow projections, [Canwest] believes it will have sufficient liquidity to enable it to continue operating normally through the period," the company said.
The company also said its syndicate of five banks has permanently capped the line of credit at $112-million.
In February, senior lenders said a subsidiary of Canwest,
Canwest Media Inc., could withdraw no more than $20-million on the credit line until yesterday. Canwest Media includes conventional Canadian television properties, the National Post newspaper and a selection of cable channels.
Canwest Media has already drawn $92-million from what was originally a $300-million credit facility. In exchange for capping the credit line, bankers granted Canwest Media some wiggle room on its debt covenants.
In total, Canwest is carrying about $3.7-billion of debt on its books. Much of that was taken on to purchase a portion of Alliance Atlantis Communications in 2007 in partnership with the U. S. investment bank Goldman Sachs.
Canwest Media warned last month that it would be in danger of breaching its debt covenants in the second quarter of this year.
Canwest has said it would put its five-station network of conventional television stations up for sale, while CTVglobemedia Inc. said this week that it would shutter two money-losing 'A' channel stations in Southern Ontario.
Canwest said it continues to take "proactive steps to reduce its operating and capital costs" and that it "continues to actively pursue opportunities to divest of non-core operations and assets."
"Not a lot has changed. We have a structured process here," Canwest spokesman John Douglas said yesterday. "We're just continuing moving it along."
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CTV projects loss of $100-million on conventional television
GRANT ROBERTSON
Globe and Mail update
February 27, 2009 at 10:20 PM EST
Amid a slumping economy, CTV Inc. told federal regulators it expects to lose as much as $100-million on its conventional television operations in 2009, painting a bleak portrait of the year ahead in the TV sector.
That announcement was contained in documents filed to federal broadcast regulators that also revealed CTVglobemedia took a $1.7-billion writedown on its television operations at the end of the last quarter.
The figure is the largest in a recent parade of hefty writedowns on television assets this year. In November, CTV rival CanWest Global Communications Corp. announced it was writing down the value of its television assets by $1-billion. This month, Rogers Communications Inc. said it was writing down the value of its City-tv network by $294-million.
The moves reflect a deterioration in the value of network television assets in recent years, as competition from cable channels and the Internet has shifted audiences and advertising dollars away from the big networks. While the companies don't take a cash hit, accounting rules require them to adjust the value on their books.
“These are tough times for all Canadian businesses, but those of us who work in the broadcasting sector are feeling the effects of both our own unique issues and the recession,” CTVglobemedia Inc. chief executive officer Ivan Fecan told the network's staff in a memo Friday. CTVglobemedia is the parent company of CTV and also owns The Globe and Mail.
A steep drop in advertising revenue brought on by a recession has hit the networks hard at a time when they have also spent heavily to acquire programming from Hollywood in a battle for ratings, and to sell more commercials.
Mr. Fecan told staff the company would resume its call to the Canadian Radio-television and Telecommunications Commission to let the conventional TV networks charge fees for their signals. Only specialty channels can charge monthly fees, including those owned by the big broadcasters, such as TSN and Showcase. The proposal has been a controversial one so far, since the cable and satellite companies have said they will pass the fees, of about 50 cents a month, to consumers. The networks have been turned down twice by the CRTC on the proposal.
“In the long term, we believe the only real solution to the crisis in conventional is fee-for-carriage, which American broadcasters have been negotiating and are now beginning to receive,” Mr. Fecan said.
In revealing the significant writedown to the CRTC in regulatory filings, CTV also said it may have to cut back on programming commitments in some TV markets this year, which could affect spending on news shows. The announcement comes in advance of licence renewal hearings set for April.
Television writers and producers are concerned that the networks plan to demand significant reductions to the amount of Canadian shows they must produce, using the economy as the basis for their argument.
In its filing Friday, CTV argued the problems for conventional TV run deeper and asked the regulator to only give it a one year licence renewal for all of its stations. CTV said any short term fixes the regulator could put in place over the next year would have little impact. It would rather discuss the fee issue at broader hearings in 2010.
After announcing this week it will close two small-market TV stations in Windsor and Wingham, Ont., CTV said it may have to take similar steps in other markets. Its conventional TV stations lost $13-million last year, the first time they had recorded a loss.
Though CTV and CanWest have bought dozens of cable stations, which are fed by monthly subscriber fees, as a way to diversify their assets, CTV said that hasn't compensated for the decline in network television revenue.
“Since we now lose significant amounts of money in conventional, it is clear that our company would be in better financial position if we closed our conventional television operations,” the network said. “Our revenues are dropping precipitously. Moreover, when advertisers do make a buy, it is at the very last minute, making forecasting impossible,” the networks said.
Regulatory filings from CanWest and Rogers Communications are expected to be made public next week. It is expected that CanWest will paint a similarly bleak picture of the TV industry in its filings. CanWest has put its five-city E! network up for sale and has indicated it may shut them down if a buyer can't be found.
The writedowns on TV assets in Canada come on the heels of major writedowns in the United States. CBS Corp. took a write down of $14.12-billion (U.S.) on its flagship TV network and radio stations. Rupert Murdoch's News Corp. wrote down several of its media properties, including taking $4.6-billion (U.S.) out of the value of its broadcast assets such as the Fox network.
When CanWest announced its writedown, the company's CEO Leonard Asper said TV networks no longer carry the values they had only a decade ago. “The big network television station, which used to be one of three places you could get information, is not as valuable as it was,” Mr. Asper said at the time. In a memo to staff, he compared the media writedowns to a drop in real estate prices.
“A year ago, for example, a house on the market might have been worth $350,000. ... Now that real estate prices have fallen, that same house is possibly now only worth $200,000,” Mr. Asper said. “But did anything with the house change? No, but the weakening market has forced it, along with all the other houses in the neighbourhood down.”
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