Heavy write-down for Canwest investor

Fairfax Financial's stake worth 94% less than a year ago

TORONTO -- A day after Canwest Global Communications secured a one-week deadline extension from U.S. bondholders, 22.6% stakeholder Fairfax Financial Holdings said it is writing down its investment in the debt-strapped media group.

Fairfax CEO Prem Watsa told an annual shareholders meeting in Toronto that the Canwest Global stake has been marked down heavily to reflect a 94% collapse in the value of the broadcaster's stock in the past 12 months.

The Fairfax stake in Canwest Global is now worth about CAN$5.5 million ($4.5 million), compared with a year-earlier value of CAN$98 million.

The overall market value of Canwest Global is about $30 million ($25 million), based on a Wednesday closing price of CAN 25 cents per share on the Toronto Stock Exchange, an 8% increase for the day.

That market capitalization is well below the CAN$2 billion Canwest Global, which is controlled by the Asper family of Winnipeg, Monitoba, was worth before the current economic downturn, which has hit its newspaper and TV assets hard.

On Tuesday, the broadcaster secured a one-week reprieve after failing to make an overdue $30.4 million payment to U.S. bondholders.

Canwest Global said that it received an extension until April 21 from a majority of the U.S. bondholders who are owed $761 million.

That brings the debt talks with the U.S. noteholders in line with separate negotiations with senior lenders on a CAN$300 million ($250 million) credit facility that also has an April 21 deadline.

The $30.4 million payment was originally due on March 15. Missing the payment put the U.S. bondholders in position to demand repayment of the $761 million principal, as well as the unpaid interest payment and default interest.

But Canwest Global said the U.S. bondholders have agreed not to demand immediate repayment "to coincide with the expiry date of Canwest Media's waiver agreement with its (credit facility) senior lenders."

A successful result for Canwest Global in its current negotiations with bankers and U.S. bondholders could open the way for a wider debt recapitalization. But failure to meet its current obligations could force Canwest Global to file for bankruptcy protection as it attempts to fend off the effects of deep advertising downturn on its newspaper and TV assets.

To avoid that fate, Canwest Global has cut jobs and programming costs and begun to sell assets. But no major asset sale has so far been achieved that would enable the Canadian broadcaster to significantly pay down its knee-buckling $4 billion debt load.

Among CanWest Global's media assets are 13 cable channels that it operates in partnership with Goldman Sachs & Co. and a 57% stake in Australia's Network TEN.
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