Canwest Global Communications made a dent in its debt Thursday when a long-awaited $34-million cheque arrived from former partner Hollinger Inc., a positive development in an increasingly tense corporate drama.
CanWest collected on a payment that was long in dispute; it dates back to the company's acquisition of Canadian newspapers from Hollinger nine years ago. An arbitrator ruled in CanWest's favour in January, and now the cash has arrived.
CanWest will set aside $30.5-million of this sum as collateral against its senior credit facility, a loan that is being renegotiated with banks. Late Wednesday, CanWest announced that it had agreed with bankers to extend waivers on that facility until April 7. The previous deadline was March 11.
There is now just $42-million drawn on that line of credit, and CanWest had already set aside $20-million of cash to back the facility, so it's material to the bankers to have this extra $30.5-million.
At the same time CanWest extended talks on its senior debt, the company advised its bondholders that it will not make a $30.4-million (U.S.) interest payment to note holders as scheduled on March 15, 2009. CanWest said: “Under the terms of the notes, failure to make the interest payment does not permit the noteholders to demand payment of the approximately US$761 million principal amount of outstanding notes if the interest payment is made on or prior to April 14, 2009.”
While this move was not unexpected, it clearly raises the stakes in CanWest's attempts to work out new terms with creditors, who are owed a total of $3.9-billion. If April 14 comes and goes with no interest payment, noteholders will be rolling out their lawyers.
As it moves to gets its balance sheet, well, rebalanced, CanWest has sold a number of small assets in recent weeks. By the end of this month, the company is expected to make a decision on the sale or closing of five conventional television stations, in four provinces. There's a soft deadline of March 31 on that process.
The amount of cash involved in the fate of these five stations is minimal, but there may be larger forces at play here. This is all very speculative, but lots of fun for those who enjoy the theatre of business leaders interacting with government.
With the future of five local broadcasters hanging in the balance, CanWest is also working with erstwhile rival CTVglobemedia in pitching federal regulators on a new business model from conventional TV.
In simple terms, the broadcasters are fighting for the same guaranteed fees on conventional channels that they get from cable companies - read cable subscribers - for specialty channels. If the CRTC does make a decision on the fee regime, it's likely years away. Which means the debate has little relevance to Canwest's current financial situation.
But one of those five CanWest local stations is the CHCH TV 11 - a popular source of programming in its home market of Hamilton, Ont. The CHCH footprint covers a great many ridings that have swung between the major parties in past federal elections. The prospect of CHCH going dark on the federal Conservatives' watch - a decision that could be blamed on flawed regulations - could anger a whole lot of southern Ontario voters.
That just might get the politicians interested in making rapid changes to the economics of conventional TV, a development that would be very relevant to both CanWest and CTVglobemedia, which has already announced plans to close two Ontario conventional TV stations.
