Canwest trying to avoid loan breach

Broadcaster examining entire portfolio, CFO says

TORONTO -- Canadian broadcasters are feeling the pain as global recession and tightening credit markets bite, even as pay TV operators here have so far managed to insulate themselves.

Canwest Global Communications kicked off the industry's earnings season Wednesday by announcing that it might breach its loan conditions on $3.7 billion ($2.99 billion) in bank debt.

"Based upon current revenue and expense projections, the company may not be able to comply with its existing quarterly total financial leverage ratio covenants in fiscal 2009," the broadcaster, which also owns a controlling stake in Australia's Network TEN, warned.

Canwest Global CFO John McGuire told analysts during a conference call that the broadcaster has "a number of levers that can be pulled to alleviate the situation, and avoid the breach."

Company CEO Leonard Asper refused to provide details on which assets might be put up for sale or shuttered to ease credit problems, "but I can ensure everything in the entire portfolio is getting a good look over."

Overall, Canwest Global posted a first-quarter loss of CAN$33 million ($26.5 million), compared with a profit of CAN$41 million in 2008, as revenue rose 2% to CAN$886 million ($715.5 million)

The broadcaster saw Canadian ad revenue squeezed at its conventional TV and newspaper units, while its niche TV channel and digital sectors saw ad revenue grow.

Domestic cable TV and pay TV broadcasters, whose subscriber revenue offset exposure to slumping ad markets, seemed to fare better.

Despite a worsening business climate, Astral Media saw first-quarter earnings climb 13% to CAN$42.5 million ($34.3 million), against CAN$37.5 million in 2008, on revenue up 24% to CAN$244.5 million ($198 million), after its acquisition of radio giant Standard Radio last year.

And rival pay TV broadcaster Corus Entertainment maintained its first-quarter profit line at CAN$40.6 million ($32.8 million), against a year-earlier CAN$39.4 million, on revenue up 1% to CAN$216.8 million ($175.2 million).

Both broadcasters offset a faltering radio market by chopping operating costs and boosting pay TV subscriber revenue with the recent launch of HBO Canada.

"There's a top to bottom clamp down on expenses, and we're maximizing our programming," Corus Entertainment CEO John Cassaday told analysts during a conference call Wednesday.

Both Astral and Corus stopped short of projecting major job cuts, in contrast to rivals like Canwest Global Communications, CTVglobemedia, Rogers Media and Quebecor Media, which in recent months have slashed jobs and spending as major advertisers and the domestic economy shift into reverse.

Domestic cable operator Cogeco bucked that trend Wednesday as it pointed to strong radio and cable revenue behind a return to profitability in its first quarter.

Montreal-based Cogeco earned CAN$11.1 million ($9 million) on cable system acquisitions, which reversed a loss of CAN$10 million in 2008. Revenue rose 18.5% to CAN$308.4 million ($248 million).
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