Canwest Global, Goldman Sachs in court

Bank seeks to shield its 13 Canadian cable channels

TORONTO -- Marriage was on the minds of Canada's TV regulators in November 2007 when the CRTC warned broadcaster Canwest Global Communications Corp. that allowing Goldman Sachs & Co. to largely finance their $1.4 billion joint venture could prove an unstable and shaky union prone to break up.

"It's always easy when you are first getting married -- my wife may not agree with me. You always want to contemplate what happens if you have to get to the divorce stage as well when you get involved with another partner," CRTC commissioner Len Katz told assembled Canwest Global and Goldman Sach & Co. executives asking for his blessing of their business combination.

Gerry Cardinale, managing director at Goldman Sachs, told the CRTC that the key to marital bliss was ensuring "there is no gaming going on in terms of the ultimate ownership" of cable and conventional TV assets to be jointly run by the Goldman Sachs and Canwest Global.

Richard Leipsic, senior vp and general counsel at CanWest Global, went further, telling Katz and fellow CRTC commissioners that "a marriage of 20 to 30 years might be more difficult" to manage, but a joint venture to run from 2007 to 2011 between the Canadian and American partners was a piece of wedding cake.

Despite those assurances, the 2007 marriage of convenience has hit the rocks.

Goldman Sachs and Canwest Global were this week fighting it out in court, as the Wall Street bank looks to carve its 13 Canadian cable channels out of the Canadian broadcaster's current creditor protection proceedings.

Goldman Sach's Gerry Cardinale in documents filed Monday with the Ontario Superior Court of Justice accused Canwest Global, now controlled by U.S. bondholders, of "fraudulent" and "unfairly prejudicial" behavior after it allegedly broke their 2007 shareholders agreement.

The U.S. bank accused Canwest Global of shutting down a subsidiary, 4414616 Canada Inc, that shielded its 13 cable channels from Canwest Global's court-directed restructuring unveiled on Oct. 6 (HR, Oct. 6).

Their August 2007 shareholders agreement gave Canwest Global the right to buy out Goldman's stake in Canadian broadcast assets in 2011.

In return, the U.S. bank agreed to largely finance Canwest Global's 2007 takeover of Alliance Atlantis Communications, which included a half-stake in the popular "CSI" franchise.

Two years later, Cardinale has accused Canwest Global of going behind Goldman Sach's back to hand effective control of the 13 cable channels to creditors as the Canadian broadcaster looks to sell assets and get out from under $4 billion in crippling debt through the courts.

"We expected that before any insolvency filing, Canwest would advise us if and how (Goldman) would be affected and how the specialty TV business figured into the plans of the restructured Canwest," Cardinale argued.

Goldman Sachs wants the subsidiary restored and its joint entity with Canwest Global to be kept out of current court proceedings.

John Douglas, vice-president of public affairs at Canwest, said the broadcaster has received Goldman Sach's court filing and is reviewing it.

"We believe the issues raised are without merit, and we will respond through the court process as appropriate," he insisted.

Douglas added it was too soon to know whether Goldman Sach's intervention will impact on Canwest Global's wider restructuring, which it hopes to wrap in January at the same time that it emerges from creditor protection.