April 9, 2009 / 12:45 PM / in 9 years

UPDATE 3-Canwest reports big loss as debt talks continue

* Q2 share loss C$8.09 versus year-earlier loss of C$0.19

* Q2 revenue 9 percent lower at C$637 million

* Takes C$1.19 billion writedown

* Shares drop 4.8 pct to 30 Canadian cents (Adds analyst’s and company comments. Updates share price)

OTTAWA, April 9 (Reuters) - Canwest Global Communications Corp CGS.TO reported a ballooning second-quarter loss on Thursday after taking a C$1.19 billion ($970 million) writedown, and said the outlook for advertising revenue remains grim, sending its shares down almost 5 percent.

Canwest, which owns the Global TV network as well as a stable of daily newspapers across Canada, is struggling with a debtload of about C$3.7 billion in the midst of a deep recession.

“The (quarterly) results will likely be less watched than all of the debt maneuverings,” Benjamin Mogil, an analyst at Thomas Weisel Partners, said in a note.

The company is working with lenders on a recapitalization scheme to restructure the debt amid speculation that it may have to file for bankruptcy protection.

Earlier this week, senior lenders agreed to extend talks until April 21 from April 6 over borrowing conditions.

In the immediate future, the company faces a US$30.4 million interest payment on its 8 percent senior subordinated notes. It has already missed the payment once and if it fails to make it by April 14, the noteholders can demand payment of about $761 million of principal.

Such a scenario could spell crisis for the Winnipeg, Manitoba-based company.

“We just don’t want to get into a speculative discussion about what may or may not happen on any kind of recapitalization/restructuring,” Chief Executive Leonard Asper, said on a conference call. “Discussions are ongoing with all of our stakeholders.”

Canwest’s shares, which have fallen 94 percent in the past year, were down 4.8 percent at 30 Canadian cents on the Toronto Stock Exchange early on Thursday afternoon.

Canwest said on Thursday that economic conditions will continue to hurt advertising revenue, with the exception of specialty channels and digital sectors.

The company said it “remains focused” on cutting operating costs and boosting efficiencies, while trying to reorganize its capital structure.

For the quarter ended Feb. 28, Canwest said its loss widened to C$1.44 billion, or C$8.09 a share, from a loss of C$34 million, or 19 Canadian cents a share, a year earlier.

The results included a C$1.19 billion noncash writedown of goodwill, assets, property. and equipment. Canwest said the writedown reflects lower profit expectations and a weak advertising outlook. About 83 percent of the writedown is related to Canwest’s publishing operations.

Operating profit before restructuring and impairment costs fell 31 percent to C$75 million from C$109 million, it said.

Revenue fell 9 percent to C$637 million from C$701 million. “FOCUS ON REDUCING COSTS”

Canwest is considering selling five conventional TV stations and has agreed to sell its stake in sports broadcaster Score Media.

It has also sold the New Republic magazine in the United States to a group of private investors, including the magazine’s editor-in-chief.

No large-scale asset sale that would make a significant dent in Canwest’s debtload has yet materialized, however.

Canadian financial services giant Fairfax Financial Holdings (FFH.TO) owns about 22.4 percent of Canwest’s subordinate voting shares and analysts have speculated it could step up with some sort of refinancing proposal.

A big part of Canwest’s debt dates back to its 2000 acquisition of a stable of Canadian newspapers from Hollinger International for about C$3.2 billion.

The deal made Canwest the country’s biggest publisher of daily newspapers. It included 13 big-city dailies as well as 126 community newspapers, Internet assets and a 50 percent stake in the National Post, a national newspaper. The company later bought full control of the Post.

In 2007, Canwest expanded its television holdings by partnering with an affiliate of U.S. investment bank Goldman Sachs (GS.N) to buy specialty-TV group Alliance Atlantis Communications for C$2.3 billion.

Canwest is controlled by the Asper family of Winnipeg. Aside from Canadian newspaper and TV assets, it has television holdings in Australia through its stake in Network Ten.

In November, Canwest cut 560 jobs at its newspapers and television stations to slash costs and cope with the advertising slowdown.

$1=$1.22 Canadian Reporting by Susan Taylor and Scott Anderson in Toronto; editing by Peter Galloway

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