The Australian management of the Ten Network continues to watch the gyrations of its Canadian parent, Canwest, with some resignation and bemusement.
It seems the day is drawing closer when the banks will finally either take control of Canwest, or a refinancing will be forced on the Canadian company that will result in significant board changes.
Ten management are known to not be at all fazed by the prospects of the banks taking over Canwest, and Ten (Canwest owns 56.6% of Ten).
“They (the Canadians) only have three out of seven board seats, so it would not be a big deal,” said one senior manager.
The company, it seems, is resigned to something happening and knows it can’t change the outcome because it will be decided in Canada.
The most logical outcome is for the 22.2% shareholder in Canwest, Fairfax Financial, a big Canadian investment company, to lead the recapitalisation of Canwest. That would also see the Asper family forced to lose control of Canwest and Lenoard Asper forced to leave the board of Ten. Canwest executive, Peter Viner, a former CEO of Ten, would not leave.
Viner is well known in Australian media and financial circles.
But Canwest continues to wriggle, with yet another development: it seems to have found a bit more cash.
Last week it said it wouldn’t be able to make it, but then the settlement of an arbitration dispute with another publisher (formerly owned by the disgraced Canadian media mogul, Conrad Black) has generated, surprise surprise, around the same amount of money. So will the payment now be made to help keep the banks and others at bay?
The desperation at Canwest can be seen from the fact that it won $50.7 million in arbitration in its dispute with the Chicago Sun-Times, formerly owned by Hollinger International, Black’s main media company. Canwest bought the Canadian papers of Hollinger.
Now it has settled for $34 million after the struggling Sun Times suggested a commercial settlement might suit both groups.
Canwest had initially said it was owed $84 million in “adjustments and claims” related to the takeover of Hollinger’s Canadian newspaper group in 2000 (yes, it has taken over eight years to settle the argument).
In January, Canwest was awarded a lesser $50.7 million amount by an arbitrator after a dispute with the former Hollinger International, now Sun-Times, over the adjustments.
On Wednesday of last week, Canwest received a reprieve from its bankers until 7 April and said it would not be making that US$30.4-million interest payment on some its debt due this week.
The company is not out of the woods; The $30.4 million will be paid on another facility, at least one other loan facility remains in potential default.
Now Canwest says $30.5 million of the settlement will be deposited as collateral under its senior credit facility for Canwest Media Inc. The remaining $3.5 million will go towards Canwest Publications Inc., a subsidiary. Canwest said the new payment “will increase the balance of the collateral deposit to approximately $50 million.”
A day earlier Canwest, in revealing a further extension from its banks after it failed to make a payment on the senior debt, said the following on the present financial position of Canwest media:
CMI has reduced the principal outstanding under the senior secured credit facility to approximately $42 million in letters of credit, has cash-on-hand of approximately $30 million, and has access to a further $20 million of liquidity through its senior credit facility. In addition, cash of approximately $20 million has been placed on deposit by CMI as collateral with its senior lenders. Based upon current cash flow projections, the Company believes that it will have sufficient liquidity to enable it to continue to operate normally through April 7, 2009.
Now it has an extra $34 million.