TORONTO - A legal fight between U.S. investment bank Goldman Sachs and insolvent Canwest Global Communications Corp. is brewing after Goldman filed court documents suggesting creditors of the media conglomerate have been making moves without telling them.
The allegations centre around a numbered company created by Canwest at the request of Goldman to hold the specialty TV assets the Winnipeg-based company bought from Alliance Atlantis in 2007.
Goldman says that company, known as 4414616 Canada Inc., was closed in the days before Canwest filed for CCAA protection in Canadian courts on Oct. 6, and it believes the decision was made by its U.S. and Canadian creditors.
The Wall Street firm is also concerned that the move could be a way for creditors to tighten their control on the highly lucrative specialty channel assets, which include HGTV, Showcase and Diva.
Canwest spokesman John Douglas said the company disagrees with Goldman's claims.
"We believe they're without merit and we'll respond through the court process as is appropriate," he said.
"Our relationship with Goldman Sachs, as well as the transactions they've expressed concerns about, are all contained in documents that we've previously tabled with the court. They're all set out and they've been set out for a month."
Douglas also emphasized the separation between Goldman and Canwest in relation to the specialty channels.
"The numbered company was part of Canwest operations," he said in response to a question on whether it had anything to do with the agreement with Goldman Sachs.
The specialty channel division was not one of the pieces of Canwest that filed for creditor protection when the conglomerate could not meet repayment obligations for $4 billion in debt.
Goldman has asked the court to force Canwest to reform the numbered company, which would ensure that the channels acquired from Alliance Atlantis would remain separate from the rest of Canwest's assets.
Last month, a lawyer for Goldman Sachs told the court that the firm was concerned its multibillion-dollar deal with Canwest could be jeopardized by an aggressive timeline for its restructuring plan.
Canwest hopes to completed the restructuring process by the end of January.
Goldman lawyer Kevin McElcheran said the media conglomerate could use the time table as a way to pressure the investment bank for changes to the contract, under which Goldman kept the rights to the lucrative "CSI" TV franchise, while Canwest kept the specialty cable channels.
Goldman isn't willing to renegotiate the agreement - which requires that Canwest's specialty channels meet certain financial targets by 2011 or face shifting back into the hands of Goldman - and will fight any attempts to make changes, McElcheran said.
At that time, he suggested the judge should carve out the Goldman Sachs agreement from the rest of the restructuring process.