CanWest Global Communications newspapers granted court protection

Janet McFarland and Susan Krashinsky

An Ontario court has approved an order placing the newspaper division of CanWest Global Communications Corp. under creditor protection, paving the way for the company to begin looking for buyers for Canada's biggest newspaper chain.

A group of lenders led by Canada's five largest banks has agreed to take ownership of the newspaper operations under a “pre-packaged” financial restructuring under the Companies' Creditors Arrangement Act. But CanWest said Friday a search continues for other buyers who can make a superior offer.

Madam Justice Sarah Pepall of the Ontario Superior Court approved the order placing CanWest Limited Partnership under court protection Friday afternoon following a day-long court hearing.

The Asper family, which controls CanWest Global, will have no ownership of the newspaper operations under the restructuring proposal. The family jumped into the newspaper business in 2000 when CanWest agreed to buy the former Southam Inc. chain of papers from then-owner Conrad Black.

The group, saddled with $1.3-billion in debt, includes many of Canada's leading daily newspapers, such as the Ottawa Citizen, Calgary Herald, Montreal Gazette and Vancouver Sun.

The National Post newspaper is not included in the bankruptcy filing because it is not a borrower under the lending facility subject to the court protection filing, said Ann DeRabbie, a spokeswoman for the lending group. But the newspaper purchase offer by the creditor group includes the National Post.

“The National Post will stay as an integral part of the print and online businesses,” Ms. DeRabbie said in an e-mailed statement.

In a statement Friday, the lending group said the bankruptcy-protection filing is in the best interests of employees and suppliers of the newspaper operations because it will provide them with “much needed certainty that the businesses will continue to operate.”

The lenders said they plan to create a new Canadian newspaper company with an independent board that will manage the ongoing operations of the papers. It is expected to eventually transition into a publicly traded company, the lenders said.

The lending group said “substantially all” of the newspapers' 5,300 employees would be retained and the new company will assume obligations such as pensions and benefits. While the lending group includes some international financial institutions, the new company's voting shares will be Canadian owned, meeting Canada's ownership requirements for media properties.

Arnold Amber, director of the Communications Workers of America union in Canada, which represents workers at five of the CanWest newspapers, said the court filing Friday has been anticipated since CanWest's television operations filed for court protection in October.

But he said the final shoe has not dropped for employees because it is unlikely the banks will remain owners of the papers for long.

“The banks aren't going into the newspaper business,” Mr. Amber said. “So to a great degree, we don't know what is really going to happen because we don't know what the people who put together this bid really have in mind.”

In an internal memo to employees of the newspaper operations, Dennis Skulsky, president and chief executive officer of CanWest's publishing division, said the goal of the pre-packaged court filing is to minimize business disruption to allow operations to continue uninterrupted.

He said the division now has sufficient cash flow to fund its ongoing operations. And as “an additional safety measure,” the group has secured a $25-million debtor-in-possession loan.

“That's why we can say with confidence we can continue to meet our obligations to suppliers who provide goods and services after the filing date,” Mr. Skulsky said.