Canwest Global Communications Corp. has just over a week to prove to lenders it is making inroads in its struggle to repay debt, cut costs and sell off assets to improve its bottom line.
And the tight timeline granted by the media company’s creditors suggests the cash-strapped media giant already has some sales lined up, analysts suggested Monday.
“The banks want to see if [the company] can make some further progress… over the next few days,” said Chris Diceman, senior vice-president at the Dominion Bond Rating Service.
On Friday, Canwest won an extension for the waiver on the borrowing conditions of its debt until March 11, which will allow the company to continue shopping its assets around and finalize any sales or financings in the pipeline.
Diceman said the extension signals that Canwest’s lenders found some optimism in the company’s quest to rework its assets, which probably means the company is in discussions with buyers.
Even so, Canwest will likely have to appeal to its lenders to have the March deadline extended yet again.
“You’re going to see a series of deadlines met, extended, adjusted and modified because the banks don’t want to own the [Canwest] business,” said one media analyst who asked to remain anonymous.
With each deadline that passes “the noose will tighten a little more.”
If Canwest’s plan fails, and the company defaults on the debt, then more dire consequences could be ahead.
“In and of itself, this [deadline] is not final, however this could be the rock that begins the landslide,” said Carmi Levy, a technology analyst at AR Communications Inc. in London, Ont.
“If they default on this one chunk of debt, then it throws into doubt their ability to effectively service the rest of their debt.”
Canwest CEO Leonard Asper has been trying to avoid such an outcome by meeting banks and potential investors on Bay Street to shop around its “non-core” assets, which the company has never publicly defined.
Observers have suggested that could mean anything from its highly lucrative specialty cable channels to the struggling National Post newspaper.
Canwest has also placed its five E! network television stations on the block, though none have sold yet.
The banks have also permanently cut the company’s $300-million credit line by nearly two thirds, to $112 million.
Canwest will have access to only another $20 million in credit, since $92 million has already been advanced by Bank of Nova Scotia to Canwest Media, the unit which operates the Post, broadcast assets and other businesses.
