Canwest Global Communications Corp. is heading towards
another deadline to restructure a debt agreement with its bankers on
Tuesday, but time could be running out for the broadcaster and
newspaper publisher which has already been given an extension by
lenders to solve its financial woes.
The Winnipeg-based company
is walking a fine line that could include filing for bankruptcy
protection, and industry observers have been focusing on the
possibility Canwest may eventually be carved up.
Both Canwest’s international assets and newspapers could be sold as part of a streamlining of its operations.
On Tuesday, the debt-laden company will have to amend the terms of its credit with senior lenders.
“What
the banks want to do is make sure the company is making progress on
selling assets or getting additional capital,” said Chris Diceman,
senior vice president at DBRS.
“Provided that the company has a
business plan and can get through this liquidity crisis and the
pressures on its business given the economy … then I think the banks
will be willing to help in some fashion.”
Then, Canwest faces
what’s considered a more critical April 14 deadline for its missed
interest payments to bondholders, who hold US$761 million in debt.
The
best case scenario will be that Canwest reaches new arrangements with
its lenders, and the worst case would force the company to enter into
court protection from creditors and let its lenders sell off the
company’s assets.
“We’ve seen so many delays up until now that my
gut tells me there’s going to be yet another one,” said Carmi Levy, an
analyst at AR Communications Inc.
“I don’t think creditors have
reached the end of their patience with Canwest. They’re getting there –
the thread is getting shorter – but you don’t just rearrange hundreds
of millions of dollars worth of credit on a dime, and you certainly
don’t do it under the gun.”
However, even if it resolves the
April deadlines Canwest isn’t in the clear. Overall, the company has
$3.9 billion in debt, which it is trying to recapitalize.
“The
question is when will the economy pick up to the point that Canwest
will be able to work itself out of the hole it has dug for itself
through cash flow,” Levi said.
“Because until advertising begins to pick up, Canwest is hardly in the position to finance anything.”
Last
week, the company hit another financial snag when its Australian
broadcaster Ten Network Holdings Ltd., which it has a 57 per cent stake
in, posted a near A$80 million loss and cancelled its dividend payments.
Canwest
received A$10 million dividend payment for this quarter, but Ten said
it didn’t expect any further dividends for the rest of the 2009
financial year.
Reports have suggested that the Canadian
broadcaster is looking to auction off at least part of its holdings in
Ten, after backing off of a proposed equity offering when the offers
were too low.
Canwest has been selling off non-core assets, like
American political magazine New Republic and a 26 per cent stake in
sports broadcaster the Score, in an attempt to shore up cash.
Other
alternatives to bankruptcy protection could include getting additional
financing through banks or another lender, or an equity injection.
Last
month, Canwest gave a stay of execution to its five E! branded channels
until the end of the summer after previously threatening to shut them
down if it couldn’t find a buyer this spring.
