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Here’s wishing at least one business reporter would ask some questions about the deal to buy Canwest newspapers, rather than simply repeating what’s in company press releases.
On Wednesday, less than 24 hours before creditors were supposed to get together to approve a court-sanctioned deal, the meeting was postponed and late Thursday night it was announced that the buyers have “proposed amendments to the composition of their funding commitment.”
The spin? This is good news because the Ad Hoc Committee of 9.25% bondholders had “tweaked” their offer to reduce the debt burden of the new company. While the unsecured creditors proposed share in the new company falls from 45% to 32.5% (the mostly U.S.-based hedge funds get 67.5%) under the reorganized offer, this too, we are told, is good news because less debt means the new company will be worth more.
But, here are some questions that should be asked, given the circumstances:
“You’ve decided to restructure the deal so the new company has less debt. Does this mean you were having trouble selling the previous plan to investors?”
And: “Is your decision to alter your original plan, at least in part, due to the uncertain conditions in the world financial markets?”
We know, for example that last week Porter Airlines cancelled its planned initial public offering (IPO), citing poor market conditions.
“What effect will the uncertain market have on the planned IPO for the new newspaper company? Is it possible that you may back out of this proposed deal if the IPO market remains flat?”
Yes, one of the main players in the proposed deal, Steven Shapiro, a founder of Golden Tree Asset Management was quoted as saying “‘it’s way too early’ to think about an exit” which suggests the U.S.-based hedge funds are contemplating operating the newspapers for some time. But how can they do that? After all, there are laws in Canada that require newspapers to be Canadian owned.
“Has the federal government changed the laws that require Canadian ownership of newspapers? If not, how do these U.S. based hedge funds plan to get around those laws? Will the Harper government simply ignore the law? Will the Liberals, NDP and Bloc go along with that?”
Oh so many questions and very few answers.

Gary Engler