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In media circles, everyone agrees that Goldman Sachs cut a sweetheart of a deal back in 2007, when it backed CanWest Global Communications' move into specialty television.

Now, everyone in media circles is wondering if CanWest’s new owners, its creditors, will be able to undo elements of that transaction, as they try to wring more money from CanWest’s lucrative collection of 13 specialty channels.

There’s a showdown coming between these new owners - distressed debt funds - and the Wall Street powerhouse. But it doesn’t look like it will be a public dust-up.

Instead, look for some very smart fund managers and investment bankers with more than a little imagination to strike a creative bargain. It’s possible that CanWest emerges from this process with its premium collection of specialty TV channels combined with a rejigged, stronger conventional television network, Global.

Here’s a quick bit of history, to explain why the fate of a Canadian media company rests with a New York investment bank.

Goldman Sachs bankrolled CanWest chief executive officer Leonard Asper in 2007 when he bid on Alliance Atlantis Communications. It’s fashionable to give Mr. Asper a hard time for that deal, but it was well structured.

CanWest got control of money-spinning channels, including History Television, Showcase, and Food Network Canada. The company had to put up less than $200-million. (Which is not to say Mr. Asper didn’t make mistakes: Failing to sell the Australian TV network and buying back CanWest’s newspaper income trust were doozies.)

Since then, the specialty TV channels have done exactly what was expected: They’ve made tons of money, on the back of subscriber fees. These channels are CanWest’s crown jewels. The unit is known as CW Media and its profit rose 41 per cent to $53-million in the most recent quarter, compared with the previous year. The CW Media division was not included in Tuesday’s bankruptcy filing by CanWest.

However, in return for its capital in 2007, Goldman Sachs got two contractual agreements that the new owners would love to overturn, because these provisions give the investment bank a potentially enormous stake in the TV unit.

In simple terms, Goldman Sachs has the right to sell back its specialty TV stake at a premium price. And the investment dealer will eventually set the level of its stake in CW Media based on a formula that reflects the unit’s performance.

If CanWest’s new owners can negotiate a change in the formula that determines the investment dealer’s equity stake, or trim what the investment dealer makes when it moves to sell that holding, they are effectively shifting the value of the specialty TV business from Goldman Sach’s wallet into their own back pockets.

And over time, CW Media is likely to be sold at a premium price - likely eight times their forecast EBITDA. Astral and Corus are at the front of a long line of potential buyers.

Now, here’s where things get interesting.

Goldman Sachs sees no reason to revisit its arrangement with CanWest, which has been blessed by Canadian regulators, according to several sources close to the investment dealer.

To date, Goldman executives have not been invited into restructuring talks, a subject of considerable frustration at the investment bank, sources say. Financiers working with Goldman said that over the past year, the investment bank put forward programming ideas for the TV networks, and offered strategic advice on restructuring, but was ignored by CanWest management and its creditors.

One concept that’s been tossed around, but couldn’t move forward until CanWest recapitalization was set, would see Goldman Sachs provide programming and financial support to the conventional television network as part of a larger deal that reworks the entire ownership structure to more closely align all the TV holdings.

At the moment, CanWest’s new owners will have difficulty getting a decent price for Global television. As BMO Nesbitt Burns analyst Tim Casey pointed out in a research report Tuesday, the network is “worth a lot less as an orphaned asset than it is combined with a specialty portfolio.”

There are three funds driving the CanWest restructuring, and two of them are U.S. money managers: GoldenTree Asset Management, Beach Point Capital Management, along with Toronto-based West Face Capital Inc. Sources say these funds have already doubled their money on their CanWest investment, in part because the Winnipeg-based company’s stake in Australia’s Ten Network Holdings Ltd. was sold for a better-than-expected $634-million last month, and much of this money was used to pay down debt.

In looking at the emerging ownership of CanWest, which is tilted heavily towards U.S. distressed debt funds, one source said: “The government [of Canada] doesn’t want to see these assets flipped, for a quick profit. The goal should be to build a vibrant media company.”

So look for both sides to smooth things over. Finance circles are small. Distressed debt funds that are creditors to CanWest also own debt in CW Media, the specialty channel division, which should calm negotiations over the future of the specialty TV unit. These funds are also Goldman Sachs clients.