CanWest seeks financial saviour amid debt crisis
By SINCLAIR STEWART, ANDREW WILLIS and GRANT ROBERTSON AND TARA PERKINS
http://www.theglobeandmail.com/servl...Story/Business
February 20, 2009
Leonard Asper is scrambling to secure a financial lifeline for CanWest Global Communications Corp. before the end of the month to prevent his family-run media empire from sliding into bankruptcy protection.
Yet even if he is successful, the price of that lifeline could be steep. Some potential investors - including Fairfax Financial Holdings Ltd.- want to take control of CanWest away from the Asper family in exchange for any cash infusion.
At least one investor weighing a proposal said it would insist that Mr. Asper step aside as chief executive officer and that he and his siblings eliminate the dual-class share structure that gives them control of the company, according to sources familiar with the matter.
Officials at some of CanWest's main creditors believe that if the company cannot find access to hundreds of millions of dollars in new credit within the next few weeks, it could be forced to seek protection from lenders and restructure under the Companies' Creditors Arrangement Act. CanWest, which owes $3.9-billion, and its primary adviser, RBC Dominion Securities, have approached numerous institutional investors to gauge their interest in a deal.
The response from potential backers has been lukewarm, not merely because of CanWest's economic woes brought on by the recession, but because several creditors are jockeying for protection in any restructuring process.
CanWest's borrowing capacity was put on a tighter leash this month when a senior credit facility was cut back to $112-million from $300-million by Bank of Nova Scotia. The new limit is about $20-million above what CanWest has already drawn.
The limit is in place until next Friday and Mr. Asper is now trying to negotiate a new borrowing agreement by that date, in order to have the full amount of credit reinstated.
"Options on the table include some sort of recapitalization that would see creditors take a haircut, and the Asper family squeezed out," said one banker working on CanWest. "Leonard Asper ... is still focused on trying to find some sort of solution that salvages something for the family."
CanWest spokesman John Douglas said "we have ... a very structured process. It has checkpoints all along it, and one of those checkpoints is reaching an agreement with our senior lenders. That is where all the attention is being devoted right now."
CanWest's largest non-family shareholder, Fairfax Financial, is among investors that have expressed interest in a new capital injection to forestall bankruptcy protection. Bankers close to the company suggest Fairfax or other investors would have to inject about $300-million to be effective. A condition of such an investment by Fairfax would be a change in control at CanWest, according to sources.
Some other funds, including the Canada Pension Plan Investment Board, have been approached by CanWest officials, but said they were not interested in investing in the media company, sources say.
Sources familiar with the matter said Fairfax is holding off on a proposal until it gets more information on the state of CanWest's financial health - something it has been unable to obtain thus far. Any proposal would require an investor to hammer out a separate agreement with Goldman Sachs, which is a partner in CanWest's specialty channels, a stable of assets that rank among the company's most prized properties.
CanWest borrowed heavily to acquire a nationwide newspaper chain and specialty television network, Alliance Atlantis Communications, bought in 2007 for $2.3-billion. Mr. Asper anticipated paying down loans with the cash flow that comes from advertising in near-monopoly properties.
But advertising spending has dropped sharply, leaving CanWest in breach of debt covenants.
CanWest's lenders, led by the Bank of Nova Scotia, are reluctant to push the company into CCAA protection, but are pushing Mr. Asper for a plan that will see their loans repaid, banking sources say. Options being discussed by lenders include parachuting in a restructuring expert, who would supervise the sale or closing of operations.
Mr. Douglas said the company is reviewing all strategic alternatives as part of its restructuring. Relinquishing control, either by stepping back from the CEO role or allowing an investor to acquire CanWest voting shares, is not a scenario Mr. Asper has been wiling to pursue so far.
In a CCAA filing, creditors would take the reins at CanWest, and the Asper family's control of the company, based in part on a dual share structure, would disappear.