Canadian media companies hurt by economic slowdown

Wed Jan 14, 2009 9:05am EST
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OTTAWA (Reuters) - Canada's economic slowdown has squeezed advertising spending and hurt quarterly financial results for Canadian media companies, triggering warnings of weaker results and credit problems.

Canwest Global Communications Corp, which owns daily newspapers in every large urban market in Canada, said it may fall short of certain financial covenants in its credit facilities if negative economic conditions persist.

The company, which also owns Canada's Global television network and TV operations in Australia through Network Ten, said it would consider selling assets and cutting costs to reduce debt and improve profit.

Canwest, along with an affiliate of U.S. investment bank Goldman Sachs, bought specialty TV company Alliance Atlantis for C$2.3 billion ($1.88 billion) in 2007.

Based on current revenue and expense projections, Canwest said that it may be unable to comply with quarterly financial leverage ratio covenants in 2009. The company said it will work to improve profit and reduce debt in order to comply.

In November, the Winnipeg, Manitoba-based company announced it would shed 560 jobs, or about 5 percent of its work force.

Canwest's has large exposure to the advertising market, which has been sagging amid the economic downturn. Many companies trim back their ad budgets during a recession, which translates to lower revenue for media groups like Canwest.

In the quarter that ended November 30, Canwest posted a loss of C$33 million, compared with a profit of C$41 million in the same period last year as revenue increased 2 percent to C$886 million.

Media and entertainment company Corus Entertainment Inc lowered its fiscal 2009 forecast on Wednesday, despite a higher quarterly profit, due to an expected slowdown in advertising revenue.   Continued...