July 10, 2009 / 12:19 PM / 8 years ago

UPDATE 3-Canwest loss grows, focus stays on debt

* Q3 shr loss C$0.62 vs loss C$0.16 last year

* Adj Q3 shr loss C$0.32 vs profit C$0.07 year before

* Revenue falls to C$726.8 mln from C$846.2 mln

* In talks on recapitalization plan

* Considers cash investment, converting debt to equity

* Stock gains C$0.01 to C$0.075 on TSX (Adds details from conference call, analyst’s comments, stock price)

By Susan Taylor

OTTAWA, July 10 (Reuters) - Canwest Global Communications CGS.TO reported a bigger quarterly loss on Friday as the Canadian media company, struggling to stave off bankruptcy, was hit by a big writedown and declining revenue.

Trying to stay afloat as it wrestles with a debt load of close to C$4 billion ($3.4 billion), the company said it is in default under terms of its credit facilities and continues work on a recapitalization plan.

The financial restructuring may involve a cash investment and, or, a conversion of some existing debt to equity, it said.

“These transactions are, as you can expect, quite complex, but we’re making some headway,” Chief Executive Leonard Asper said during a conference call.

“And our goals remain the same, which is to position our assets for the future and take advantage of the economy once it begins to improve with the proper capital structure.”

Significant debt reduction is needed to resolve liquidity issues and continue operating, Canwest said in a statement.

If it fails to find an acceptable recapitalization plan by July 17 with holders of its 8 percent senior subordinated notes, the company said it could face demands to immediately repay all debt.

“There’s been a series of deadlines...so I think whether that’s ultimately extended, or not, is hard to say at this point,” said Chris Diceman, senior vice president at credit rating agency DBRS.

“I‘m somewhat surprised at the patience they’ve (bondholders) had to date, but clearly there is something worth negotiating over.”

Analysts said that the quarterly results, which featured a particularly poor showing from Canwest’s publishing operations, were less relevant than the company’s debt challenges.

“The only thing that would have made a difference is if there was an announcement that they’d accidentally won (the lottery) every single week of the quarter,” said Duncan Stewart, an analyst at DSAM Consulting.

“But even that might not have made a substantial difference. Given that they failed to do that, this quarter just supports most people’s expectations that their debts are bigger than their assets and they can’t service their debt.”

The shrinking group of analysts that still follows the battered stock are watching for signs of a restructuring deal, said Stewart, who began coverage of the company in 1991.

ADVERTISING SLUMP

Facing a sharp decline in advertising, Canwest said it lost C$109.6 million, or 62 Canadian cents a share, in its third quarter, ended May 31.

That compares with a loss of C$28.4 million, or 16 Canadian cents a share, in the same period last year.

The loss includes a non-cash C$247 million impairment of goodwill for its publishing operations as well as interest-rate and foreign-currency swap losses of C$177 million and foreign exchange gains of C$368 million.

Excluding items, Canwest posted an adjusted net loss of C$57 million, or 32 Canadian cents a share. That is worse than expected. Analysts, on average, had forecast a flat performance, of naught per share before exceptions, according to Reuters Estimates.

Canwest, which owns the Global TV network and a stable of daily newspapers across Canada, said revenue fell 14 percent to C$726.8 million.

Shares in the Winnipeg-based company, which have lost about 96 percent of their value in the last 12 months, were up 1 Canadian cent at 7.5 Canadian cents at midday on Friday on the Toronto Stock Exchange.

That follows a drubbing on Thursday, when the stock sank from 13 Canadian cents to 6.5 Canadian cents on heavy volume. Some market watchers said the fast, steep drop suggested traders were concerned the company was poised to announce a restructuring and delisting.

$1=$1.16 Canadian With additional reporting by Chakradhar Adusumilli in Bangalore; editing by Peter Galloway

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