Some Australian investors and media analysts are getting a bit eager to forecast the sale of the Ten Network in any recapitalisation of its struggling Canadian parent, Canwest. Saturday, Australian time, Canwest announced it has won another extension from its senior lenders on a deadline to come up with a recapitalisation plan.
Canwest said discussions between its subsidiary Canwest Media Inc. and an ad hoc committee representing its lenders are continuing, with a new deadline to have an agreement in principle in place by 11 September.
Reports in Australia, sourced from Canadian media outlets the Toronto Globe and Mail say that the Canwest restructuring has come up against a series of glitches in the past few weeks that are delaying a deal with bondholders.
At the top of that list may be the most unlikely of culprits – a television show called MasterChef Australia.
The popular cooking program has been a major hit on Australian television this year, peaking at 4.1 million viewers, and is one of several shows causing CanWest’s Australian TV network, TEN, to steal audience share from its rivals. Shares in TEN have nearly doubled since February, bringing the value of CanWest’s 50.1-per-cent stake to about $600-million, as analysts predict the network could be well positioned if the economy improves.
With the network’s value suddenly on the rise, CanWest and its biggest creditors have been forced to divide their attention between a debt-for-equity swap and the potential sale of TEN. While the money is a far cry from the $1-billion the Canadian media company thought it could fetch a few years ago, those involved in the restructuring know that they must give a sale serious consideration now.
The stake in TEN is arguably CanWest’s most valuable, and most liquid asset. Though the company has sold smaller assets, including its stake in Canadian sports channel The Score, the impact has been small.
The lenders control the Ten stake, and any cash raised by selling it would go first to them. Canwest would have trouble accessing it directly, unless there was some sort of debt for equity swap. Ten shares are trading around $1.23 at the close last Friday, 23 times its earnings and high because of speculation that it could be part of the restructure. But the stake cannot be sold by Canwest without approval of the lenders, and until that happens, Ten will remain 50.1% owned by Canwest.
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