CanWest Global Communications Corp. has sold its Victoria television station to a group of employees for $2, a move that will prevent the station from going off the air.
CHEK-TV was slated to be closed at the end of August, but was given a one-week reprieve after the company was approached by staff with a bid to acquire the station and continue operating, using backing from local investors.
CanWest initially turned down the offer, fearing that it would be on the hook for operating losses until federal regulators gave their formal approval for the deal. However, the talks continued this week and the station continued broadcasting.
The station is one of five that has operated under the E! Canada brand that CanWest announced would be closing down at the end of August, unless buyers could be found.
CanWest is burdened by nearly $4-billion of debt and is negotiating with bondholders on a restructuring. The company wanted to shed the money-losing E! stations, which were a drag on its earnings. Small-market TV stations are under financial pressure, the network has said, since program costs are escalating and viewership is shrinking amid competition with cable and the Internet, causing advertising revenue to drop.
In addition to the Victoria sale, two of those five E! stations, in Hamilton and Montreal, were sold to Toronto-based Channel Zero Inc., while the station in Kelowna, B.C. was transferred to CanWest's Global TV network. Only the company's E! station in Red Deer, Alta. will be closed.
In an internal memo to employees Friday, CanWest chief executive officer Leonard Asper said the five stations represented 266 jobs, but with the various moves, only 30 jobs will be lost with the station closure in Red Deer.
"Many dedicated individuals on both sides of the table came together and the result is that it has preserved jobs and service in [Victoria]" Mr. Asper said in a statement. "One week ago, we thought that this station was going to close and today we have a result that is beneficial for all parties."
CHEK TV employs 45 people. CanWest retains the real estate, while the broadcasting equipment and licence is being transferred to the employee buyout group. Though CanWest wouldn't comment on the sale price, a source close to the situation said the nominal fee paid was $2.
While buying a TV station for a few dollars may seem like a low-risk deal, the new owners will be tasked with turning a money-losing operation around. The benefit to CanWest is to have the financial losses off its books, particularly as it tries to avoid filing for protection under the Companies Creditors' Arrangement Act.
In addition to the $2 buyout, the employee group and local investors pooled $2.5-million to cover any operating losses in the early going. However, CanWest said last week that wasn't enough, since the approaching shutdown of the station resulted in CHEK having no advertising or programming to put on air for the fall. The company refused the initial offer on fears it would be responsible for those losses during the two-month period it could take regulators to assess the deal.
CanWest has received assurances the Canadian Radio-television and Telecommunications will expedite its scrutiny of the transaction, while the employee group will shoulder any losses. As well, the company has agreed to provide up to six months of "transitional support" for the station to continue operating, including master control functions that the new group would not be able to set up quickly. That should lower the financial blow to the new owners.
Also in his memo to staff, Mr. Asper told CanWest employees he will address the company in early October in a national teleconference to update them on the company's restructuring efforts. The town hall format will allow CanWest employees to ask Mr. Asper questions about the restructuring.