DBRS: Canwest’s Recapitalization Plans Include Creditor Protection for CMI and Certain Entities

DBRS notes today that Canwest Media Inc. (Canwest Media or the Company) has entered into an agreement with members of the ad hoc committee of 8% senior subordinated noteholders in order to pursue a recapitalization transaction.

As part of this process, Canwest Media and certain entities (the CMI Entities, which includes the conventional television operations, some specialty channels, National Post and the corporate office) will file for creditor protection under the Companies’ Creditors Arrangement Act (CCAA). DBRS notes that the businesses under Canwest Limited Partnership, CW Media Inc. and certain other television operations are excluded from this CCAA filing.

As part of the proposed recapitalization, creditors of the CMI Entities whose claims are compromised (including those of the US$761 million 8% notes) will receive common shares of a restructured Canwest Global Communications Corp., with the amount dependent on new equity financing of at least $65 million. The current common shareholders will receive 2.3% of the new shares.

DBRS notes that following the recent sale of its stake in Ten Network Holdings Limited (Ten Network), the CMI Entities have $65 million in cash, and have arranged for $100 million of debtor-in-possession financing. The Company’s operations will continue uninterrupted throughout this process. Furthermore, DBRS notes that US$398 million of Ten Network sales proceeds was placed with the trustee for the benefit of the 8% noteholders.

DBRS downgraded the Issuer Rating of Canwest Media to D on September 2, 2009. This was preceded by DBRS lowering its Senior Subordinated Notes rating on Canwest Media to D on April 15, 2009, after the Company failed to make a US$30.4 million interest payment originally due on March 15, 2009.

Given this recapitalization agreement and the CCAA filing, DBRS expects to withdraw its ratings of Canwest Media – and likely those of Canwest Limited Partnership, which is pursuing a recapitalization of its own – in due course.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Media and Entertainment, which can be found on our website under Methodologies.

This is a Corporate (Telecom/Media/Technology) rating.