GAAP refiling clarification.
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304 old loans of Atlantis +1183 = 1487 Sure Goldman loaned 767 million and repaid the 303.9 sounds like a billion investment. Would this not equate that the 2.5 billion qutoed Atlantis Canwest purchase price, is also more?
But, Atlanits a Goldman Sachs takeover, then Goldman costs are that of buying Atlantis. Note Goldman sale price presented to the Canadian Government to buy the total included the debt cost added to total, which it then divided up the price, so no payment for the 303.9 old loans of Atlantis/ and the non arms length loan of 700million, was none, added debt to the balance sheet without loaning anything.
p.8 2009 Financial Statements As agreed with Goldman Sachs, the purchase price allocated to CW Media was $1,487 million, including transaction costs of $55 million and assumed debt of $303.9 million which was immediately repaid. The acquisition was financed through our investment of $262 million for a 35% equity interest, Goldman Sachs’ contribution of $481 million in exchange for its puttable interest and debt financing of $767 million, net of financing costs of $23 million. CW Media holds interests in 18 specialty television channels in Canada. The shares of the entities that hold the CW Media specialty television channels which are regulated by the CRTC were put into trust under an independent trustee pending CRTC approval, which was subsequently received in January 2008.
Canwest and Goldman Sachs' Atlanits purchase detailsp.20 Quote, "As agreed between the Company and Goldman Sachs, the purchase price allocated to the broadcast business was $1,183 million, including transaction costs of $55 million. The Alliance Atlantis long term debt of $304 million was assumed by the Company and immediately repaid. The acquisition was financed through the Company’s investment of $262 million for its 35% equity interest, Goldman Sachs’ contribution of $481 million in exchange for its puttable interest and debt financing of $767 million, net of debt issuance costs of $23 million. CW Media, a wholly owned subsidiary of CW Investments, operates the acquired broadcast business which primarily consists of 18 specialty television channels in Canada. "
We have, subject to regulatory approval, committed to combine our Canadian broadcast operations with the CW Media operations (together, the “Combined Operations”) in 2011. In 2011, our economic interestin the Combined Operations will be determined based on a formula that is based on the segmentedoperating profit of the Combined Operations. p9
Restructuring agreement, as stated to Canwest shareholders in the 2009 Financial Statements
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Financial Restructuring and Creditor Protection
Canwest Global and Canwest Media
Our operating results and cash flows for the year ended August 31, 2009 reflect the impact of the
significant and sudden declines in advertising revenue for our Canadian television, Australian television,
out-of-home and publishing operations reflecting the weakened economic environment. The significantly
reduced advertising revenue has reduced cash flows from operations and impaired our liquidity. As at
August 31, 2009 our current liabilities significantly exceeded our current assets. In March 2009, our
subsidiary, Canwest Media did not make an interest payment which was due under the 8% Notes and is
in default under the terms of the indenture governing the 8% Notes (the “Indenture”). In addition, our
subsidiary, Canwest Limited Partnership, is in default under the terms of its senior secured credit facilities,
its senior subordinated credit facility and the indenture governing the 9.25% Notes because it breached
financial covenants under its senior secured credit facility and failed to make payments of interest and
principal on its senior credit facility and its related hedging derivative instruments, it failed to make interest
payments on its senior subordinated unsecured credit facility and its senior subordinated unsecured notes
and it failed to satisfy the demand for immediate repayment of its obligations related to the hedging
derivative instruments.
We have implemented operational restructuring plans to reduce costs and have closed or sold
underperforming operations. Subsequent to year end, we used the proceeds from the sale of our
Australian television and out-of-home operations to reduce debt and improve our operating liquidity.
On October 5, 2009, Canwest Global entered into an agreement with the members of the Ad Hoc
Committee pursuant to which it intends to pursue a recapitalization transaction. The proposed
recapitalization transaction is supported by members of the Ad Hoc Committee representing approximately
70% of the 8% Notes and is the result of arm’s length discussions with the Ad Hoc Committee. The
support of the proposed recapitalization by the Ad Hoc Committee is subject to the satisfaction of a
number of conditions set out in the Recapitalization Agreement, and the Recapitalization Agreement may
11
be terminated in certain events. Certain deadlines contemplated by the Recapitalization Agreement have
been extended by the parties to the Recapitalization Agreement.
Under the proposed recapitalization and as set out in the Recapitalization Agreement, creditors of the
Canwest Applicants whose claims are compromised under the plan of arrangement, including the holders
of the 8% Notes, will receive an equity interest in restructured Canwest Global. Existing shareholders of
the Company will receive a 2.3% equity interest in restructured Canwest Global. It will be necessary for the
Company to obtain new equity financing in the amount of at least $65 million. The percentage of the equity
of a restructured Canwest Global to be received by affected creditors will be dependent on the percentage
of equity sold to new investors.
As contemplated by the Recapitalization Agreement, on October 6, 2009, the Canwest Applicants
voluntarily applied for and obtained an order from the Court providing creditor protection under the CCAA.
The Initial Order provides for a general stay of proceedings for an initial period of 30 days, which was
subsequently extended to January 22, 2010 and is subject to further extension by the Court. The Initial
Order may be further amended by the Court throughout the CCAA proceedings based on motions from the
Canwest Applicants, their creditors and other interested parties. On October 6, 2009, the Canwest
Applicants, through their Court-appointed monitor, also made a concurrent petition for recognition and
ancillary relief under Chapter 15 of the U.S. Bankruptcy Code.
The stay of proceedings generally precludes parties from taking any action against the Canwest
Applicants for breach of contractual or other obligations. The purpose of the stay is to provide the Canwest
Applicants with the opportunity to stabilize operations and business relationships with customers, vendors,
employees and creditors and to allow the Company to implement an orderly consensual recapitalization
transaction while continuing its day-to-day operations.
Under the terms of the Initial Order, FTI Consulting Canada Inc. was appointed as the monitor (the
“Monitor”) under the CCAA proceedings. The Monitor will report to the Court from time to time on the
Canwest Applicants’ financial and operational position and any other matters that may be relevant to the
CCAA proceedings. In addition, the Monitor may advise the Canwest Applicants on their development of a
restructuring plan and, to the extent required, assist the Canwest Applicants with a restructuring.
During the CCAA proceedings, the Canwest Applicants continue to operate with the assistance of the
Monitor and under the supervision of the Court. Pursuant to the Initial Order, and subject to the conditions
set out therein and the requirements set out in the CCAA, the Canwest Applicants are permitted to pay
outstanding and future employee wages, salaries and employee benefits and other employee obligations;
pay outstanding amounts for goods and services from suppliers considered critical to the ongoing
operations of the Canwest Applicants; and pay future expenses and capital expenditures reasonably
necessary to carry on the operations of the Canwest Applicants.
The Initial Order also allows the Canwest Applicants, subject to the provisions of the CCAA, to disclaim
any arrangement or agreement, including real property leases. Any reference herein to any such
agreements or arrangements and to termination rights or a quantification of Canwest’s obligations under
any such agreements or arrangements is qualified by any overriding disclaimer or other rights the Canwest
Applicants may have as a result of or in connection with the CCAA proceedings. Claims may be allowed
related to damages of counterparties arising as a result of such disclaimers.
The Canwest Applicants are undertaking a financial and corporate restructuring and intend to propose a
plan of arrangement as contemplated by the Recapitalization Agreement which must be approved by the
requisite majority of affected creditors and sanctioned by the Court. There can be no assurance that the
Recapitalization Plan will be supported by the affected creditors and sanctioned by the Court, or that the
Recapitalization Plan will be implemented successfully.
Was 109 million minus from 2009 net income for this? Already writedown on a future aquisiation purchase
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
p14 2009 Annual Report
Accretion of long-term liabilities. For the year ended August 31, 2009, we have recorded an accretion expense of $109 million compared to $68 million in fiscal 2008 related to the discounting of certain long-term liabilities which are accreted
to their estimated value over the term of these liabilities. The charge is primarily related to the Goldman Sachs puttableinterest in CW Investments Co. which is classified as a financial liability with an estimated accretion rate of 19%. We estimate
the fair value of the puttable interest liability based on management’s forecasts. Included in accretion expense for the
year ended August 31, 2009, is a credit of $6 million from the adjustment to the future estimated cash flows.
p17 2009 Annual Report
Accretion of long-term liabilities. For the three months ended August 31, 2009, we have recorded an accretion expense
of $43 million compared to a recovery of $7 million in the same period in fiscal 2008 related to the discounting of certain
long-term liabilities which are accreted to their estimated value over the term of these liabilities. The charge is primarily
related to the Goldman Sachs puttable interest in CW Investments Co. which is classified as a financial liability with an estimated
accretion rate of 19%. We estimate the fair value of the puttable interest liability based on management’s forecasts.
p21
Long-term debt payments
CW Media has required repayments of $15 million in annual principal payments on its long-term debt. As at August 31, 2009, Canwest Media had accrued interest which was overdue of $66 million, $34 million of that was paid in October2009 utilizing the proceeds from the sale of Ten Holdings. As at August 31, 2009, Canwest Limited Partnership had accrued interest which was overdue of $39 million, $14 million of that was paid in September 2009 utilizing the restricted cash that Canwest Limited Partnership had deposited for this purpose.
p22 Ten not a cash cow
~~~~~~~~~~~~~~~~~~~~~~~~
Distributions
Ten Holdings historically made distributions twice annually. In January 2009, Ten Holdings distributed $15 million, $9 million
to us and $6 million to other shareholders. Ten Holdings did not make any further distributions in fiscal 2009. We sold our
interest in Ten Holdings in October 2009.
p23
As at August 31, 2009, CW Media had not drawn an amount upon the $50 million revolving term loan and had fully drawn the amount allowed under the term loan. CW Media Holdings Inc. also has US$338 million senior unsecured notes which bear interest at 13.5% and are due on August 15, 2015. No principal or interest payments are due under the senior notes until August 15, 2011 at which time semi-annual payments of interest only will commence. CW Media made a voluntary interest payment on August 15, 2009 for $25 million (US$23 million) representing accrued interest for the period from February 16, 2009 to August 15, 2009. The notes are guaranteed by CW Media Holdings and its wholly owned subsidiaries.
If an “Insolvency Event” (defined to include the commencement of proceedings under the CCAA) occurs in respect of
Canwest Media and is continuing, Goldman Sachs is entitled to sell all of their shares in CW Investments Co. to a bona fide
arm’s length third party at a price and on other terms and conditions negotiated by Goldman Sachs in its discretion provided
that such third party acquires all of the shares of CW Investments Co. held by the Company at the same price and on the
same terms and conditions. If Goldman Sachs causes such a sale prior to the combination of Canwest Media’s Canadian television
operations with CW Media’s television operations, the entitlement of Goldman Sachs and the Company to the net proceeds
of such sale would be established by a formula set out in the CW Investments Co. Shareholders Agreement.
With loan and other unused credit lines, why the missed interest payments?
Very good question.
In May 2009, Canwest Media issued $105 million (US$94 million) of notes and received cash of $100 million (US$89 million).
The notes bear interest at 12%.
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