UPDATE 1-Canwest gets debt waiver extension to April 7

Wed Mar 11, 2009 10:02pm EDT

* Debt waiver extended to April 7

* In talks to extend credit even further

TORONTO, March 11 (Reuters) - The media unit of Canwest Global Communications Corp CGS.TO and its senior lenders agreed to extend a waiver of loan conditions until April 7 so that Canada's biggest media company can stay operating while it seeks a route to an eventual recapitalization.

Canwest said on Wednesday that it would not make an interest payment of about US$30.4 million due on March 15 but it said that under the terms of the notes, its creditors cannot demand payment of the US$761 million principal amount if the interest is paid by April 14.

It said that if talks with its senior lenders and a creditors' committee are successful it will be able to extend access to its credit facility beyond April 7 and then pursue a recapitalization transaction.

The news came after Canwest said late last month that its banks had permanently cut the senior credit facility of its main Canwest Media unit to C$112 million ($87.50 million) from C$300 million.

The company and its banks had agreed to keep talking on revamping the credit facility until Wednesday, March 11. Canwest said at the time that C$92 million of the C$112 million total has already been drawn down.

Canwest said on Wednesday that its media unit and financial institutions had terminated certain currency and interest rate swap agreements related to its senior subordinated notes, resulting in net proceeds to Canwest of about C$105 million, which has been used to reduce obligations under its senior credit agreement.

The company said it believes it has "sufficient liquidity" to operate normally through April 7 including about C$30 million cash-on-hand and access to a further C$20 million through its senior credit facility.

Analysts have said that it is possible that Canwest, with its debt load of about C$3.7 billion, may file for bankruptcy protection as the weak economy wreaks havoc on advertising revenues at its stable of television stations and newspapers.

Canwest, which owns the Global television network and a chain of daily newspapers in Canada, is trying to slash its operating and capital costs and is looking at divesting non-core assets. It is considering selling five conventional TV stations and agreed to sell its stake in sports broadcaster Score Media.

The Winnipeg, Manitoba-based company has also sold The New Republic magazine in the United States to a group of private investors, including the magazine's editor-in-chief.

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 for Canwest.

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.

That 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 its Canadian newspaper and TV assets, it also has television holdings in Australia through its stake in Network Ten.

Media groups such as Canwest are facing a big drop in advertising revenue as companies have cut back marketing spending as they tighten their belts to weather the economic downturn. (Reporting by Wojtek Dabrowski in Toronto and Sinead Carew in New York; editing by Richard Chang)

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