The tightening of credit is about to shake the Canadian economy -- and Canadian journalism -- to its core.
Remember this, folks: there are only a handful of Canadian media companies that are not over-leveraged and saddled with crippling levels of sub-prime debt. TorStar and the Halifax Herald are OK. GlobeMedia, with Thomson's deep pockets, will also make it, though it will be dismantled into its constituent parts. CanWest survives on junk bonds. (Let's see if the Alliance-Atlantis/CanWest deal closes, as scheduled, tomorrow.) My bet: CanWest will be liquidated, its papers and TV assets sold off at below debt value. Quebecor is also over-leveraged and its media properties are, in the main, garbage. It, too, will be broken up. Ted Rogers once said that he doesn't worry about his debt, his bankers do. Well, everyone's worried now. "Convergence" is over, and a lot of media people are in very big trouble.
This problem will be spread through Canadian business. How heavily leveraged is Onex? Magna? CP? Will the Alcan deal go through? What about the dozens of other major deals built on the back of easy money? Leveraged buy-out and asset stripping is a pyramid scheme. No one can keep it going forever. Ask Conrad Black.
Sept. 25, 2008
I still believe this is how the credit crisis will play out in Canada, The banks are the big dominos. There are many small ones.
That's not what I hope. It is, unfortunately, what I expect.