WINNIPEG – Canwest Global Communications’ subsidiary, Canwest Media Inc. and its senior lenders have agreed to extend the waiver of certain borrowing conditions until April 7, 2009, the company announced late Wednesday. This is the second such extension of the waiver.
As well, the company has advised its senior lenders that it will not make the March 15, 2009 payment of interest of approximately US$30.4 million on its outstanding 8% senior subordinated notes. Under the terms of the notes, failure to make the interest payment does not permit the noteholders to demand payment of the approximately US$761 million principal amount of outstanding notes as long as the interest payment is made on or prior to April 14, 2009.
CMI also said it has commenced discussions with representatives of an ad hoc committee of noteholders “representing a significant majority amount of the aggregate principal amount of CMI’s 8% senior subordinated notes,” reads the press release. “Discussions with representatives of this group are aimed at allowing sufficient time for a recapitalization of Canwest that is satisfactory to all of its stakeholders, including its senior lenders and noteholders.”
The company has also been trying to sell a number of non-core assets, such as its E! branded secondary TV network (as we’ve reported), and has sold some smaller assets like its interest in Score Media and the New Republic magazine.
But its real issues are the company’s level of debt and the fact the economy is knocking the stuffing out of its ad sales on conventional television and in its newspapers.
“CMI will continue discussions with its senior lenders and representatives of the ad hoc committee of noteholders which, if successful, would extend CMI’s access to its credit facility beyond April 7, 2009 and enable CMI to pursue a recapitalization transaction.”
The company and a group of financial institution counterparties have terminated certain currency and interest rate swap agreements relating to CMI’s senior subordinated notes, the release adds, resulting in net proceeds to CMI of approximately $105 million, which has been used to reduce obligations under the senior credit agreement. As a result, CMI’s 8% senior subordinate notes are no longer hedged against currency fluctuations.
But the company is still between a rock and a hard place.
“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,” concludes the company’s statement.
