TORONTO – Seeking to protect its rights as a co-owner of Canwest Global’s stable of specialty channels, U.S. investment banking firm Goldman Sachs has filed a motion against a portion of the Canadian broadcaster’s restructuring attempts.
Filed late Monday with the Ontario Superior Court of Justice, the motion asks the court to reverse the windup of a numbered holding company of Canwest’s. According to the Goldman Sachs motion, 4414616 Canada Inc., a division of Canwest Media Inc., was shuttered on October 5, 2009, the day before Canwest’s Companies, Creditors, Arrangement Act filing on October 6.
As readers may recall, Canwest could not have come into ownership of the former Alliance Atlantis specialty channels without the help of Goldman Sachs Capital Partners. The two companies put together a unique arrangement which saw GSCP put up substantial cash ($650 million) and Canwest put up its conventional TV business and ($220 million) with the proviso it would buy GSCP out beginning in 2011.
Together, they created CW Investments to buy AA’s channels (HGTV, History, Showcase, etc.).The shares of CWI were apparently owned by the numbered company and GSCP and when “441”, as the GS filing calls it, was wound up, it exposed GSCP to significant risk during the CCAA restructuring process.
Goldman Sachs’ Monday motion, the centrepiece of which is an affidavit by managing director Gerry Cardinale, laments how GSCP was kept in the dark for months by Canwest. Cardinale’s memo insists that Canwest wanted to tell GSCP what was going on but was prevented from doing so by the Ad Hoc Committee of debtholders, to which Canwest owed – and still owes, hundreds of millions of dollars.
When Cardinale tried to talk to Canwest’s senior folks “(t)hey told me that they had no authority to tell GSCP anything about the restructuring process that was being conducted privately with the secured lenders and the Ad Hoc Committee of Noteholders and they were in fact prohibited by the Ad Hoc Committee from doing so,” reads his affidavit.
And later, he added: “The transfer of the assets of 441 to (Canwest Media Inc.) as part of the wind up of 441 improperly stayed the rights of GSCP,” and the wind up “was an abuse of the CCAA and a fraudulent and oppressive transaction,” reads the affidavit.
“We expected that before any insolvency filing, Canwest would advise us if and how the GS parties would be affected and how the Specialty TV business figured into the plans of the restructured Canwest,” adds Cardinale’s court filing.
But the Ad Hoc Committee wouldn’t let Canwest let GSCP know. Noting in the affidavit that Canadians must control Canadian media companies, Cardinale wondered just who is running this show now? “It raises a very appropriate question of ‘who is in charge of this restructuring?’” said Cardinale, noting that if Canwest’s senior leaders can’t even discuss the restructuring with GSCP, that the Noteholders clearly are and not Canwest management.
According to a CRTC spokesperson contacted by Cartt.ca, the Commission would like to know, too, and has asked Canwest directly. The broadcaster has yet to get back to the Regulator, however.
More to come as this develops.
– Greg O’Brien
