The Hook

TORONTO — Canwest Global Communications Corp. (TSX:CGS) will likely get yet another reprieve on debt payments today, but analysts say time is running out for the struggling media company.

Canwest has violated the terms of a senior secured credit facility and also has failed to pay interest on senior notes. Tuesday was the latest deadline for both a restructuring of the senior debt and an overdue US$30.4-million payment on the notes.

If the company does not make the note payment that had been due March 15, the noteholders can demand repayment of US$761 million in notes outstanding as well as the missed interest.

Canwest, which owns newspapers and television stations across the country, has received a series of extensions and will likely get another one, said Carmi Levy, an analyst at consulting firm AR Communications Inc.

"They'll probably get another extension, but cats only have nine lives, and at some point they're going to run out of time," Levy said.

"Creditor patience is not infinite and at some point they'll expect payment - or they will expect them to seek court protection and pursue resolution through the avenue of bankruptcy."

Canwest has been struggling under an increasingly unmanageable debt load ever since it bought the former Southam group of big-city papers from Conrad Black's Hollinger group in 2000 for $3.2 billion, then spent $2.3 billion two years ago for the Alliance Atlantis specialty TV channels.

Its plight has been exacerbated by the recession, which has ravaged advertising revenues in both print and broadcast media.

Canwest, controlled by the founding Asper family, is still hoping to restructure its debt without filing for bankruptcy protection, but it is entirely dependent on what the noteholders decide, said Chris Diceman, senior vice-president at ratings agency DBRS.

"That's the linchpin in these negotiations: whether the bondholders are willing to accept what the company is proposing to them," Diceman said.

The alternatives are "fairly bleak, in terms of some sort of court protection or a bankruptcy filing."

Overall, the company has $4.1 billion in debt, which it is trying to recapitalize.

Canwest has struggled to raise cash to meet the deadlines, selling small non-core assets including American political magazine The New Republic and a 26 per cent stake in sports broadcaster The Score.

It gave a stay of execution last month to five E! local television channels until the end of the summer after previously threatening to shut them down if it couldn't find a buyer this spring.

Levy said Canwest has found few buyers for its assets and may eventually be forced to liquidate, "selling them for pennies on the dollar."

"This is not a market in which acquisitions happen at the frequency or at the depth that Canwest hopes, so as a result it's stuck between a rock and a hard place," he said.

"It can't sell assets, the assets that it can sell are barely making a dent in its overall debt load, so it's just not a happy situation."

He said the company may be forced to walk away from some holdings if it can't find buyers.

Unless the economy turns around immediately and advertising rebounds, Levy said, "with each passing day the potential for bankruptcy grows, and certainly that shadow is looming large over Canwest today."

The company reported a net loss of $1.44 billion in its latest quarter, including a $1.19-billion writedown of assets, mostly in its newspaper holdings. Revenue was $637 million, down by nine per cent from a year earlier.

Canwest shares were up 3.5 cents to 26 cents in afternoon trading on the Toronto Stock Exchange, down from over $4 a year ago and $10 in mid-2007.

From The Canadian Press.