Canwest takes writedown on E! stations

Continuing losses came as the broadcaster wrote down the value of its newspaper business by $247 million, and its E! network broadcast rights by another $5 million. Canwest said it has made progress in talks with creditors on a wider recapitalization plan, but that a deal was not assured and bankruptcy protection remains a possibility.

With its future riding on reaching a deal with creditors to exchange and restructure up to $3.7 billion in debt, Canwest Global Communications on Friday posted a widened third quarter loss on falling ad revenues and a publishing business writedown.

Canwest recorded a loss of $110 million on revenue of $727 million during the three months to May 31, against a loss of $28 million on revenue of $846 million for the same period in 2008.

Continuing losses came as the broadcaster wrote down the value of its newspaper business by $247 million, and its E! network broadcast rights by another $5 million.

As its cash flow fails to service a growing debt load, Canwest said it has made progress in talks with creditors on a wider recapitalization plan, but that a deal was not assured and bankruptcy protection remains a possibility.

‘These transactions are, as you can expect, quite complex, but we’re making some headway and our goals remain the same, which is to position our assets for the future and take advantage of the economy once it begins to improve with the proper capital structure,’ CEO Leonard Asper told analysts during a conference call on Friday.

Asper chose to make no additional disclosures on his creditor talks after Canwest has secured a series of extensions from its lenders, even as it fails to make interest payments and breaches debt covenants.

Besides its crippling debt burden, Canwest’s other Achilles heel remains falling ad revenue during the economic downturn.

Canwest’s Canadian TV business, including conventional and specialty channels, saw third quarter revenue fall 2% to $276 million. Conventional TV revenues fell $8 million, or 4%, to $174.7 million, which was partially offset by specialty channel revenues at its CW Media climbing 2% to $101.1 million.

Conventional ad revenue was down 5% during the latest quarter, again partially offset by specialty TV ad revenue rising 5%.

The overall TV ad revenue fall came amid rising programming costs, especially for U.S. network series.

Canwest revealed it committed itself to spending $367 million on new and returning U.S. series at the recent Los Angeles screenings, and was hard-pressed in May to secure price reductions from its Hollywood program suppliers.

Canwest’s president of Canadian television Peter Viner explained 50% of foreign programming costs remained tied up in multi-year contracts.

‘It’s not possible to do a correction in one year,’ he told analysts.

The broadcaster also revealed its struggling E! stations have lost between $30 million and $40 million in the current year.

The losses were most marked at CHCH in Hamilton and limited at CJNT in Montreal, two stations recently acquired by indie broadcaster Channel Zero.

The three remaining E! stations in Red Deer, Kelowna and Victoria face closure if buyers are not secured by Aug. 31, Viner told analysts.

As for the future of Canwest itself, the broadcaster remains in talks with creditors on a possible new cash injection and/or debt-for-equity swap.

‘We believe that a significant reduction in the amount of or the elimination of our subordinated debt obligations are critical to ensuring our continuation as a going concern,’ Canwest Global said in a management discussion paper that accompanied its latest financial results.

From Playback Daily