* Canwest to offer retention payments to 20 key employees
* Pressure from advertisers, TV studios mounts on Canwest
By Wojtek Dabrowski
TORONTO, Oct 7 (Reuters) - Canwest, Canada’s biggest media company, plans to pay almost C$10 million ($9.4 million) in bonuses to keep 20 key employees in their jobs as some of its television and newspaper operations are restructured under bankruptcy protection.
The proposed payments are disclosed in a court filing made by Canwest, which said on Tuesday that its key Global television network and its flagship daily newspaper, the National Post, have filed for protection from creditors.
Speculation mounts that some of Canwest’s holdings may be sold off.
Canwest Global Communications CGS.TO, which also owns a stable of specialty-TV channels and a chain of daily newspapers in big Canadian cities, is trying to recapitalize its balance sheet, currently creaking under a debtload of about C$4 billion.
In addition to the debt, a court filing by Canwest Chief Financial Officer John Maguire this week shows that the uncertainty about the financial strength of the company is exerting additional pressure on its media properties.
He says the company has learned that a number of financial institutions that back the production of Canadian TV programs for Canwest have been refusing to provide interim financing to the shows’ producers.
Also causing significant strain is the fact that major U.S. television studios have demanded letters of credit before renewing programming agreements with the company.
Canwest says its restructuring is supposed to take no more than six months and that paying C$9.8 million in retention bonuses to 20 key employees over the period will act as an incentive for them to lead the company through the court process.
“(It) also ensures that they are properly compensated for their assistance in the reorganization process,” Maguire states in the filing.
The names of the employees and the amounts they would receive under the plan were not disclosed.
Such incentive payments to key executives are not unusual — and not uncontroversial — in bankruptcy protection proceedings. Fallen Canadian technology titan Nortel Networks NRTLQ.PK, for example, implemented similar payments, angering the company’s laid off employees.
The recession has taken a deep toll on Canwest, hurting its advertising revenues as companies scale back marketing spending. This has prompted deep cost-cutting at the Winnipeg, Manitoba-based company, including 560 layoffs late last year.
Financial backers for Canadian television programs that Canwest airs have become cautious given Canwest’s health and have questioned its ability to meet its financial obligations, the court filing states.
Big U.S. studios are also effectively forcing Canwest to prepay for some of this season’s programming months before it is able to get any advertising revenue from the shows, the filing says.
Major advertisers are also jittery. Ad agencies have been calling to express concern about Canwest’s stability, and at least two major long-term ad customers have decided not to renew their existing contracts, Maguire said.
$1=$1.06 Canadian Reporting by Wojtek Dabrowski; editing by Peter Galloway