The task of selecting the lead actor for a hit TV show pales beside the challenge of finding the right investor for the final stage of restructuring at CanWest Global Communications .
CanWest has begun auditioning money managers and industry players for the role of financial saviour, as the company needs an additional $65-million to complete the court-supervised recapitalization that began months ago. This supposedly prepackaged filing for creditor protection is actually far from all wrapped up, given the relatively short list of potential players for that role of white knight.
Casting calls are being made by RBC Dominion Securities, and there are a number of restrictions on who the dealer can approach. Some are practical: Federal regulations require that the new investor in CanWest be Canadian.
The list of candidates will also be winnowed down by more subtle issues. First, there's the size of the potential investment. At $65-million, or $50-million if the player that steps up accepts CEO Leonard Asper's offer of a $15-million contribution, this opportunity is likely too small for the big domestic public pension funds. The CPP Investment Board, Quebec's Caisse and the rest of that crowd typically put their money to work in much larger chunks.
Yet the complexity of CanWest's ownership requires a degree of expertise that smaller domestic players simply don't possess. Putting equity into this restructuring means taking on a sophisticated group of distressed-debt funds that control the company's debentures, then trying to work out a deal on CanWest's specialty TV channels with another savvy player, the private equity arm of Goldman Sachs.
A delicate touch with regulators is also required. If federal media watchdogs decide the recapitalization translates into a change in control of the media company, CanWest must make substantial contributions to a federal industry fund. That's a payment the cash-strapped company would prefer not to make. Mr. Asper's continued presence at CanWest is aimed in part at finessing those ownership rules.
So who will end up investing in CanWest? Who has experience in operating companies, in distressed debt, and in dealing with some of the capital market's sharks?
That list would have to start with Onex, which to date has shown minimal interest. Fairfax Financial might also get a call, though guiding light Prem Watsa is likely far less enthusiastic about media now than he was in the past - the insurer has taken a drubbing on stakes in Torstar and CanWest. There may be two or three domestic private equity and hedge fund players that could step up.
That is the end of our little list. Media rivals seem willing to wait for the dust to settle, and buy pieces of CanWest off the financial players.
In recent court appearances, CanWest's lawyers have tried to spin the final portion of this restructuring as a process that will play out quickly, and cleanly. A 30-minute sitcom, if you will, rather than an epic.
But if there's one constant in this process, it's that everything to do with CanWest takes longer than expected and turns out to be complex. Expect that to be true of the search for a star in the final instalment of the media company's recapitalization.