Balance of power shifts at Canwest

Lenders are to impose a chief restructuring officer.

Lenders are to impose a chief restructuring officer on Canwest Global Communications to help the embattled broadcaster possibly recapitalize its balance sheet by Oct. 31.

In a filing this week to securities regulators, Canwest revealed a CRO will be appointed by the end of June and will receive bimonthly updates from management on how they are meeting restructuring milestones.

The appointment of a CRO follows Canwest’s recent agreement with CITI Business Credit Canada and US bondholders to receive $175 million in new capital to keep operating as it attempts to restructure and stave off bankruptcy.

As part of that agreement, Canwest will be required to supply weekly cash flow projections and other key financial data to its creditors. And the lenders secure a veto on any potential asset sales by the Canadian broadcaster, other than the current sale of its Turkish media assets for $13 million and a sale of all or any part of its controlling stake in Australia’s Ten Network.

This week’s 300-page filing also spells out how the CRO will report to Canwest’s creditors, whom it will represent during the current reorganization process, and that it will remain independent of current management at the broadcaster.

As Canwest’s lenders attempt to indemnify themselves against possible loss or liability, the $175 million refinancing agreement stipulates that the lenders are not ‘partners or joint venturers’ of Canwest Global, which will have to rely on its own judgment to run its business while it reorganizes.

At the same time, installing a CRO underlines the recent shift in power at the Winnipeg-based company away from its controlling shareholder, the Asper family, and towards its creditors.

The regulatory filing also details how Canwest could seek court protection from its creditors in Canada or the US, in which case the new $175 million loan agreement will be converted into a debtor-in-possession arrangement.

But the lending agreement also makes clear that the CRO will be appointed to shepherd Canwest through a reorganization to be completed on Oct. 31.

That brought some comfort to Canwest shareholders, who bid stock in the broadcaster up 7% to 22 cents at about noon Thursday on the Toronto Stock Exchange.

From Playback Daily