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Publishing

CORRECTED - UPDATE 4-Canwest looks to sell newspaper unit

(Corrects paragraph 4 to clarify that the C$25 million refers to an agreed discount, not the debtor-in-possession financing)

* Publishing business gains protection

* Lenders offer about C$925 mln for newspaper business

* Canwest scouting for better offers

* Operations to continue during restructuring (Updates with court approval for creditor protection)

By Susan Taylor

OTTAWA, Jan 8 (Reuters) - Canwest Global Communications Corp CGS.V said on Friday it has received an offer to buy its newspaper division and will seek others as Canada's biggest media company put its publishing business under bankruptcy protection.

Canwest, which has struggled under a debt load of about C$4 billion ($3.8 billion), received court-approved creditor protection for its newspapers and their associated digital-media, online and mobile operations.

The company, which also owns the Global television network, said the daily National Post newspaper and its associated properties were not part of the bankruptcy filing.

A group of lenders, representing Canada’s five biggest banks, has offered to acquire the newspapers for about C$925 million ($898 million). That bid represents about C$950 million in debt, minus a C$25 million agreed-upon discount between the parties.

"Based on our understanding of the value of the assets, that is both a fair and reasonable offer for the assets, and it's a fully financed proposal," said Ann DeRabbie, a spokeswoman for Bank of Nova Scotia BNS.TO, one of the secured creditors. "It's exchanging a large portion of the debt for equity in a newly established Canadian company."

Canwest has hired RBC Capital Markets to search for superior offers for the unit, which publishes major daily newspapers including the Ottawa Citizen, Montreal Gazette, Calgary Herald and Vancouver Sun.

While not part of Friday’s filing, the flagship National Post would be included in a sell-off.

Peter Murdoch, vice-president at the Media, Communications, Energy and Paperworkers union, said the banks’ offer is a stalking horse bid, setting a floor price for the assets.

“It’s important that Canadians understand that this filing is being made not because the newspapers aren’t profitable, but because the ownership got itself way too heavily in debt,” said Murdoch, whose union represents about 1,800 journalists, pressroom and other newspaper workers.

“We would hope that whatever the new ownership is that it doesn’t handcuff itself with debt. That’s been the lesson here.”

The banks said the new company would retain substantially all 5,300 employees and assume existing collective bargaining agreements and employee pension and benefit obligations.

“It is planned to transition as soon as possible into a publicly traded corporation,” said a statement from the banks’ lawyers, McMillan LLP.

It will take about 14 to 16 weeks to complete work looking for additional offers, said Canwest spokesman John Douglas.

OTHER ASSETS UNDER PROTECTION

The move follows a separate recapitalization plan, announced in October 2009, that put the Global television network and other properties under creditor protection. The National Post was initially included in that plan, but later removed and added to the newspaper group.

Canwest Media’s specialty-TV channels are not under creditor protection.

Like other media companies, Canwest has been badly bruised by the recession, which squeezed advertising revenue. The company has slashed costs, laying off 560 staff in late 2008.

Some debt dates back to Canwest’s 2000 acquisition of newspapers from former press baron Conrad Black’s Hollinger International in a deal worth C$3.2 billion.

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

Canwest also said on Friday that it has arranged debtor-in-possession financing of up to C$25 million from some of the senior secured lenders.

Operating cash flow is sufficient to fund ongoing operations, Canwest said. It will continue uninterrupted during the restructuring.

The plan, which the company said best addresses debt, preserves jobs and protects newspapers, is supported by a senior secured lending syndicate that represents over 48 percent of senior secured claims.

The agreement must be approved by a majority of the senior secured lenders, and two-thirds in terms of the amount of their claims.

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