Bondholders Of Subsidiaries Of Canada's Largest Media Company To Obtain Equity Control As Part Of Bankruptcy

Canwest Media, Canada's largest media company, which reaches "20 million Canadians who turn to [it] every week as their source of news,
information and entertainment," just announced that its Canwest, CMI, Canwest Television
Limited Partnership (including Global Television, MovieTime, DejaView
and Fox Sports World) as well as The National Post Company units have filed for creditor protection (read Bankruptcy, or technically Chapter 15, and specifically, 09-15994, U.S. Bankruptcy Court, Southern District of New York), as part of a plan to refinance its excessive debt load. Interestingly, so confident is Canwest in investors' willingness to throw their money at anything, including bankrupt companies, that is bankruptcy plan contemplates an up to $65 million new equity raise, which apparently has still not been formalized. This plan has been, brought to you by the company's legal team from Bracewell & Giuliani, headed by Evan Flaschen.

From BusinessWire:

The CMI Entities' have approximately $65
million of cash (following the recent sale of the shares of Ten Network
Holdings Limited) and have arranged debtor-in-possession (“DIP”)
financing of up to $100 million to enable its business units to meet
their obligations to employees and suppliers of goods and services
provided after the filing date.

Under the proposed recapitalization, creditors of the CMI Entities whose
claims are compromised under the plan of arrangement, including the
holders of the CMI 8% Notes, will receive common shares of a
restructured Canwest. Existing shareholders of the Company will receive
2.3% of the shares of a restructured Canwest. It will be necessary for
the Company to obtain new equity financing in the amount of at least $65
million. The percentage of the equity of a restructured Canwest to be
received by affected creditors will be dependent on the percentage of
equity sold to new investors. Leonard Asper and members of his family
have reached an agreement with the Ad Hoc Committee on terms which the
Ad Hoc Committee would support for the investment by the Asper family of
up to $15 million in connection with the recapitalization. The Asper
family’s commitment would be subject to a number of conditions,
including securing a co-investment from one or more Canadians,
acceptable to all parties. Canwest has not made any determination with
respect to the terms of any proposed equity investment by the Aspers or
any other parties but welcomes the commitment of the Asper family to
assist Canwest in achieving a successful recapitalization.

The case has an interesting structure as can be seen by the Affidavits by Flaschen and Mrgure, provided below for your reading pleasure.

What is more interesting, is who the creditors on the ad hoc committee are, as they will effectively convert their $761 million in existing 8% bonds for full equity control. One wonders how many of these are potentially TBTF enterprises that may or may not have repaid their TARP holdings, and which would now have a key stake in determining content for one of Canada's primary (deleveraged) media corporations, and whether or not the FCC is taking a close look at this. Zero Hedge is currently going thru all relevant filings and will present appropriate findings.

Comments

[nope-1004]

I know the Asper family and can say that the founder (old man Izzy, now deceased) had a "vision".  The vision was one of a national network with monopolistic and greedy intentions.

I watch as the now CEO son talks about how bad things are, doing so in his Armani suit in a luxurious hotel conference room.

What a joke.

Good riddance!

[Anonymous]

Oh no who are we going to turn to for our syndicated American sitcoms?

[BobPaulson]

By US standards the CanWest suite was moderate but I'd say still too stridently right wing and narrowly pro-Isreal to work in Canada. The big "money down the toilet" move was the National Post which couldn't even write a sports column without some poorly veiled political agenda. It was actually a creation of the now jailed fraud felon and newspaper baron Conrad Black whose delusional personality led him to confuse his ego and his stocks (and their interchangability). 

Will be interesting so see what phoenix like thing arises from the ashes. 

[nope-1004]

Well put.  Both the Aspers and Conrad were only after one thing:  Notoriety.  How ironic, as now their legacies will be one of fraud and failure.

I am not chumbawamba

[Anonymous]

I have been getting daily (6 days per week) delivery of the National / Financial Post for many months now at a rate of just $32.00 per year. Now I am feeling a bit guilty feeling that I some how contributed to their demise.

http://www.nationalpost.com/

[Anonymous]

Doesn't somebody lose in a bankruptcy?

The landscape seems to be ever more littered with the detritus of failed business models but the dead entities lives on and the vanquished seem to suffer no long term repercussions. Sure, hedge funds and banks continue to fail as the result of the systemic risk, but everyone else seems to be absolved and made whole. Even shareholders seem to move forward undaunted with ever more capital appearing in a economy of in the midst of enormous deleveraging and a total lack of credit. Why was it necessary to borrow money again? Was it solely for the carry trade in the days before quantum easing? No where on the balance sheets of all the myriad other investors is catastrophe seen. No one reporting a one time hit to earnings. Earnings look great!
Things look better now than they ever did under debt accumulation. It's surreal.

I mean the whole reason you go bankrupt is you owe somebody more than you ever hope to repay them, but the money lost by those who had lent is just replaced with profit gained from an endless string of circular hedges.

"What's that? You went belly-up and owe me $3 billion? No problem, I just made $1 billion off a bet that you would. Next time I'll be sure to double down and make it $3 billion when you fail again next year! Honestly, what where you thinking?"

Is 2B2F just a collection of scrubbing and recycling entities that serve a higher function similar to endlessly digging and refilling the same hole until the threat is resolved?

If so, let's all just go bankrupt and get it over with.

Back in the days of King David you had 7 years to collect your debt or it was just to be forgiven as it was money you didn't really need anyway or you would not have lent it.

[Anonymous]

That's what happens when you get a financial advisor that doesn't know how to do a restructuring properly..

[Anonymous]

Gee I wonder:

http://www.google.com/hostednews/canadianpress/article/ALeqM5jMf3J1lnWJc...

http://www.crikey.com.au/2009/02/23/fairfax-financial-eyeing-off-canwest/

“Sources say investment bankers have approached two Canadian broadcasters, Corus Entertainment Inc. and Astral Media Inc., to formulate a bid for CanWest’s stake in specialty assets formerly owned by Alliance Atlantis Communications Inc.

“The channels, which include cable properties such as HGTV, the Food Network and Showcase, were the primary reason CanWest partnered with Goldman Sachs to acquire Alliance Atlantis two years ago in a deal that has pushed its debt load to $3.9-billion.