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Bondholders Of Subsidiaries Of Canada's Largest Media Company To Obtain Equity Control As Part Of Bankruptcy

Courtesy of Tyler Durden

Canwest Media, Canada’s largest media company, which reaches “20 million Canadians who turn to [it] every week as their source of news, information and entertainment,” just announced that its Canwest, CMI, Canwest Television Limited Partnership (including Global Television, MovieTime, DejaView and Fox Sports World) as well as The National Post Company units have filed for creditor protection (read Bankruptcy, or technically Chapter 15, and specifically, 09-15994, U.S. Bankruptcy Court, Southern District of New York), as part of a plan to refinance its excessive debt load. Interestingly, so confident is Canwest in investors’ willingness to throw their money at anything, including bankrupt companies, that is bankruptcy plan contemplates an up to $65 million new equity raise, which apparently has still not been formalized. This plan has been, brought to you by the company’s legal team from Bracewell & Giuliani, headed by Evan Flaschen.

From BusinessWire:

The CMI Entities’ have approximately $65 million of cash (following the recent sale of the shares of Ten Network Holdings Limited) and have arranged debtor-in-possession (“DIP”) financing of up to $100 million to enable its business units to meet their obligations to employees and suppliers of goods and services provided after the filing date.

Under the proposed recapitalization, creditors of the CMI Entities whose claims are compromised under the plan of arrangement, including the holders of the CMI 8% Notes, will receive common shares of a restructured Canwest. Existing shareholders of the Company will receive 2.3% of the shares of a restructured Canwest. It will be necessary for the Company to obtain new equity financing in the amount of at least $65 million. The percentage of the equity of a restructured Canwest to be received by affected creditors will be dependent on the percentage of equity sold to new investors. Leonard Asper and members of his family have reached an agreement with the Ad Hoc Committee on terms which the Ad Hoc Committee would support for the investment by the Asper family of up to $15 million in connection with the recapitalization. The Asper family’s commitment would be subject to a number of conditions, including securing a co-investment from one or more Canadians, acceptable to all parties. Canwest has not made any determination with respect to the terms of any proposed equity investment by the Aspers or any other parties but welcomes the commitment of the Asper family to assist Canwest in achieving a successful recapitalization.

The case has an interesting structure as can be seen by the Affidavits by Flaschen and Mrgure, provided below for your reading pleasure.

What is more interesting, is who the creditors on the ad hoc committee are, as they will effectively convert their $761 million in existing 8% bonds for full equity control. One wonders how many of these are potentially TBTF enterprises that may or may not have repaid their TARP holdings, and which would now have a key stake in determining content for one of Canada’s primary (deleveraged) media corporations, and whether or not the FCC is taking a close look at this. Zero Hedge is currently going thru all relevant filings and will present appropriate findings.

 


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