CanWest Global Communications Corp. is putting its national newspaper chain up for sale in a deal that will fetch at least a billion dollars, but runs against the wishes of its chief executive officer Leonard Asper.
In a letter filed in court Friday as CanWest's newspaper division sought protection from creditors and instigated the sale process, Mr. Asper said he objects to the move, arguing that the assets could fetch a much higher price down the road.
The newspaper division, called CanWest LP, includes 10 metropolitan dailies such as the Vancouver Sun, Calgary Herald, Ottawa Citizen and Montreal Gazette, along with 35 community and weekly papers. It has been struggling under a $1.4-billion debt and is the second half of CanWest to seek court protection from creditors.
In court, a lawyer for CanWest said the newspaper division could no longer pay its bills.
"We know that the bank has run out of patience," lawyer Lyndon Barnes said, as he outlined a process that will see the newspapers sold over the next 14 to 18 weeks.
However, in a move that exposes a division at the highest levels of the CanWest restructuring, Mr. Asper said he believed the CCAA process is being rushed as the secured and unsecured creditors seek to recoup the hundreds of millions they are owed. Mr. Asper, son of the late CanWest founder Izzy Asper, believes a higher price could be fetched at a later date, given the improving global markets.
"I profoundly disagree with an early CCAA filing by the [newspaper division]" he wrote. "I am particularly concerned that such a filing will result in undue and unnecessary harm to the [division's]stakeholders."
Mr. Asper said he has been trying for months to get lenders to inject capital into the company or find a buyer, and they have refused.
He said a creditor protection filing will damage the firm's business, which he said has stabilized.
In October, CanWest Media Inc., which holds the Global Television network, also filed for protection under the Companies Creditors' Arrangement Act (CCAA).
The sale of the newspapers will see CanWest split in two, along the lines of its television and newspaper assets. The Asper family will also lose its entire stake in the newspaper operations, acquired by CanWest in 2000 for $3.5-billion in a deal that left the newspaper division staggering under $1.45-billion debt it could not support when an economic downturn hit in 2008.
A floor price of about $1-billion has been set for the newspaper division by its senior-secured lenders, which includes the big five Canadian banks led by Bank of Nova Scotia, and 183 lenders worldwide. If no new bidders come in with a bid to beat that number, the banks will become the owners of the newspapers.
CanWest intends to sell all the newspapers as a whole, without breaking them into smaller regional groups. As well, the process is also based on none of the papers being shut down prior to a sale.
In a statement yesterday, the lending group said it is prepared to take ownership of the papers, create a new company to operate them, and then seek to spin them off in an initial public offering.
The National Post was not included in the bankruptcy protection filing yesterday, since its debt was restructured in the previous CCAA filing by CanWest Media Inc., but the newspaper is part of the group of papers that would be acquired by lenders.
A lawyer representing CanWest's secured lenders, who are owed $935-million, said yesterday the banks want to create "a safe home" for the newspapers.
"This business will be run over the long term by proper management and a board that will be independent of the creditors," said Andrew Kent, a lawyer with McMillan LLP.
Major media players such as Torstar Corp., Transcontinental Inc., Quebecor Inc., FP Newspapers LP and Glacier Media Inc. have expressed interest in looking at some of the properties, but it is not clear how serious each company is at buying newspapers.
But some sources said a financial purchaser like a pension plan or hedge fund is the most likely buyer.
"There is a value that comes with offering a national advertising package to a national advertiser like Coke or Nike," said a lawyer working for the newspaper group.
Analyst Chris Diceman of DBRS Ltd. said it is not surprising CanWest would seek to sell the chain as a whole, because the flagship National Post newspaper in Toronto could be left in the cold if regional pieces are sold off to local buyers.
Several media sources Friday said if CanWest is willing to bend, it will find more buyers for the individual properties.
Newspaper executive David Radler, who now runs Alberta Newspaper Group from his base in Vancouver, said yesterday he would be interested in some of the papers. "I'll look at the pieces that are offered to me," Mr. Radler said in an interview.
Mr. Radler and partner Conrad Black co-founded Hollinger International Inc., which sold the former Southam Inc. papers to CanWest in 2000. Mr. Radler later served time in prison after pleading guilty to one count of fraud, but has returned to running a chain of regional newspapers.
In a statement yesterday, the lending group said "substantially all" of the newspapers' 5,300 employees would be retained if it takes ownership of the chain.
With files from Jacquie McNish and Paul Waldie