The Hook

[Here is Canwest CEO Leonard Asper's memo to staff: ]

From: At A Glance (Canwest) Sent: Fri 1/8/2010 7:29 AM To: All CanWest Staff Subject: Memo from Leonard Asper -- Business Update

Good morning:

After many months of productive discussions with our senior lenders, we have reached an agreement that will result in an orderly financial restructuring of our newspaper publishing and associated online and mobile operations. Yesterday, our Board of Directors authorized Canwest Limited Partnership and certain subsidiaries (the “LP Entities”) to voluntarily file for creditor protection under the Companies’ Creditors Arrangement Act (CCAA) so that the restructuring can be supervised by the court.

The CCAA filing applies to Canwest Publications Inc., Canwest Books Inc., Canwest (Canada) Inc. and all of the newspaper publishing and associated online and mobile operations that make up the Limited Partnership, with the exception of National Post Inc. and its associated properties which are NOT part of the filing.

For active employees, the most important aspect of today’s creditor protection filing is that your salary, group benefits and pensions will remain the same. Your reporting relationships and the management of your operation will also remain unchanged. We have worked hard to ensure that this financial restructuring plan minimizes – to the extent possible – the disruption to you and the operations, and will continue to do so throughout the restructuring process.

This filing is separate and distinct from the creditor protection proceeding undertaken by Canwest Global and certain of its other subsidiaries on October 6, 2009. As such, it has no impact on employee salaries, benefits and pensions of CMI employees.

This does not mean, however, that we haven’t had to make some difficult decisions that impact some suppliers and about 50 employees currently on salary continuance. We regret the impact that this filing will have on them but after careful consideration and consultation with our legal and financial advisors, it was determined that this was the best course of action for the long-term health of the Publishing business and its 5,300 employees. We can assure all stakeholders that the LP Entities did everything possible to minimize the impact to affect parties.

While some stakeholders will regrettably be negatively impacted by today’s action, it is important to remember that this is not a bankruptcy. CCAA is a creditor protection process that will provide the time and stability to complete a financial restructuring that will provide the LP Entities with a renewed financial outlook and position the Publishing business to take advantage of the improving Canadian economy. It is a process that companies such as Cadillac Fairview, Air Canada, and Stelco have successfully used to financially restructure their operations. In each case, these companies continued to operate through the restructuring process – aircraft continued to fly and steel continued to be produced – and the companies emerged stronger and more stable.

Today’s CCAA proceeding furthers a plan that will, over time, see the broadcasting and publishing groups become more independent of one another, although to the extent that it makes sense, some relationships between the business will be maintained. With the support of senior lenders holding nearly half of the LP Entities’ senior secured debt, it will afford us the time and stability to implement an orderly financial restructuring of the Publishing group and facilitate an organized transition to a new ownership structure. In fact, this same group of secured lenders have entered into an agreement to purchase the integrated publishing business – including the National Post. This offer will provide a “floor price” for a comprehensive sale and solicitation process that will begin in the next few days to determine if superior bids emerge from any other potential buyers.

I would like to take this opportunity to stress that our restructuring efforts and the transition to a new ownership structure for the LP Entities does not mean that the Publishing assets are being liquidated or split up, nor does it mean that there will be interruption to the business’ day-to-day operations. The purpose of the “floor bid” by our senior lenders is to ensure that in all events, the publishing group will remain together.

The Publishing business remains strong with leading brands, an impressive geographic footprint and sufficient cash flow to fund ongoing operations – including goods and services provided after the filing date. As an additional safety net, the LP Entities have arranged up to $25 million in debtor-in-possession (DIP) financing. The Publishing business has worked hard to align operating costs with its revenues, and as such the LP leadership does not expect that this process is going to lead to additional job losses. Dennis Skulsky and his team will continue to make business decisions where they make sense for the long term health of the LP Entities, but this financial restructuring does not contemplate any interruption of our business operations.

The sale and investor solicitation process furthers work that started in early November with the signing of a shared services agreement that will see the broadcasting and publishing groups become more independent of one another as we begin to implement stand-alone systems and processes within the areas of IT, HR and Finance. The businesses will, however, continue to work collaboratively in some areas where it makes sense for our customers and provides a business advantage to the operations. For example, shared service agreements that govern content sharing between broadcasting, publishing and online properties and allow for consolidated and coordinated advertising sales will remain in place until at least August 31, 2010. These agreements are widely endorsed by the marketplace; they can be extended by mutual agreement and senior management has already begun discussing ways to do this.

In most cases the LP brands have served their communities for more than a century. They dominate local markets like no other publishing group, providing unparalleled national reach and access to virtually every local community in the country, across all platforms, print, online and mobile. While I cannot say with any certainty what the future will bring, there is no doubt that there remains inherent value in these operations and that they will continue to make their mark on the industry and in their communities for years to come.

A number of tools and frequently asked questions have been developed to help you better understand what was announced today and how it will impact you, our customers, advertisers and suppliers. These documents, along with a complete listing of properties covered by and outside the filing, can be found in the Business Update section on CanwestConnects and at www.canwest.com.

One thing that has always impressed me is the dedication and commitment that each of you have shown to our valued partners, advertisers, subscribers and readers. Over the last year everyone has worked very hard to get through this challenging environment and every business has made sacrifices. We’ve seen things start to turn and I can see momentum building in both the broadcasting and publishing businesses.

This is yet another challenge for everyone and the true proof our resolve will be that we maintain our momentum and not let any of this restructuring noise that we will hear in the coming days distract us from continuing to serve our communities and customers. We did this successfully with our television business, and we can do it again.

Thank you all again for your great work.

Leonard