CanWest Global Communications Corp. has basically abandoned serious attempts to sell assets, sources said, While there are interested buyers, there are two main problems: The prices are nowhere near enough to cover the debts tied to the assets, and CanWest's corporate structure makes it almost impossible to make sales work.
Take the company's newspapers. With the exception of the National Post, the papers are held in a separate company under the CanWest umbrella, so any funds raised by asset sales would have to go to pay down debt in that holding company. But the sale would reduce earnings at the parent company, which would push it closer to a debt covenant that's already too close for comfort. So while there have been approaches, CanWest can't pull the trigger on sales of individual newspapers or small groups of titles.
As for broadcasting assets, the debt tied to those is around five times earnings before interest, taxes, depreciation and amortization (better known as Ebitda for short). So unless someone is willing to pay five times Ebitda for the assets, there's not much point in selling. And nobody is paying five times in current markets.
CanWest is almost like a landlord with a rental house that's fallen so much in value that selling it wouldn't cover what's left on the mortgage. Better to hold on to the assets and collect what rent you can to cover interest payments and hope that the market recovers, because selling would leave you still with a big chunk of debt and no income at all to cover the interest.
Look for this saga to drag on, and for the company's bondholders to come out of this in control of CanWest. There may still be an Asper in the corner office, nominally in control to satisfy Canadian ownership requirements, but even that's a long shot at this point.
