CanWest bankruptcy a 'possibility'
Sydney Morning Herald
February 14, 2009
THE pressure on Network Ten's majority owner, CanWest, is not letting up, and analysts are raising the spectre of bankruptcy for the cash-strapped media group.
The company, controlled by the Asper family, early this week began looking for buyers for five of its free-to-air television stations in Canada as it is seeking to avert breaching its lending covenants this quarter.
Running a second television network in Canada was "no longer key to the long-term success of our broadcasting business", its chief executive, Leonard Asper, said, adding the company would focus on his main network, Global Television, and its pay TV businesses there.
But observers have started to question whether CanWest will get any offers for the stations in the market downturn, or free enough cash through such a sale to significantly reduce its $C3.7 billion ($4.5 billion) debt. On Tuesday Standard & Poor's lowered its long-term credit rating for the company to CCC, eight steps below investment grade, citing its "deteriorating liquidity position".
Bob Bek of CIBC World Markets told Reuters on Thursday that the company was "on the verge of bankruptcy".
Randal Rudniski, an analyst with Credit Suisse, said "a Chapter 11 [bankruptcy protection] filing is certainly a possibility".
However, he said it was more likely the company would seek "to find a remedy for its high debt leverage without court protection", leaving the Asper family control of its struggling empire.
CanWest bankers turned up the heat on the company last week when they set a limit to the amount of money the company can borrow this month.
The move has rekindled speculation over the future ownership of Ten. Mr Asper stressed two months ago that the family was intent on holding on to the business, but bankers could force it to sell the stake if covenants are breached as the loans are secured against assets including Ten.
However, observers said it was questionable that lenders would opt for such a move in the downturn, since it could be hard to get offers for Ten, whose ratings and advertising have fallen.
Contacted by Reuters in Canada over the report, a CanWest spokesman declined to comment on the analyst predictions of a possible bankruptcy.