TORONTO – Debt-ridden media conglomerate Postmedia announced a proposal Thursday to slash its $648-million debt by nearly half — but the company’s chief executive says it still has work to do to operate in a challenging industry.
The company says, if approved, the deal will reduce its debt by $307 million and save it roughly $50 million a year in interest. It’s also looking to sell between $40 million and $50 million of real estate.
“What we looked for at the beginning of this whole process was stability and certainty,” Paul Godfrey, president and CEO, said in a conference call with analysts and media. “I think we’ve achieved that.”
Under the plan, Postmedia will exchange a large portion of its debt for shares in a move that will see its lenders own nearly the entire company.
Postmedia’s second lien debt holders will swap what they are owed — roughly $345 million — for a 98 per cent stake in the company, leaving current shareholders with just two per cent.
The company will also issue new second lien notes worth about $110 million that will mature in July 2023. The second lien notes rank behind the first lien notes for any collateral, like Postmedia’s assets and property, if the company goes bankrupt.
The second lien holders were not made public, but Godfrey said there are a number, including Chatham Asset Management.
U.S. investment firm GoldenTree Asset Management LP, which once owned more than half of Postmedia’s variable voting shares and a portion of its debt, is no longer involved, he said. The company was looking for buyers of its stake earlier this year.
The restructuring will also see the publisher of the National Post and other newspapers repay $78 million of its first lien debt and be granted a four-year extension that will give the company until July 2021 to repay the remaining $225 million. Without the proposal, it would have to repay $303 million in August 2017.
“With no maturities until July 2021, Postmedia will have a more stable capital structure and be better able to focus in on its business and operations,” Godfrey said.
The plan is subject to the approval of shareholders and debt holders, but Postmedia said it has the support of about 80 per cent of its first- and second-lien debt holders and about 75 per cent of shareholders. It also may require approval from the Ontario Superior Court of Justice and the Toronto Stock Exchange.
Postmedia (TSX:PNC.A, TSX:PNC.B) expects the transaction will be complete by September.
Many media companies, including Postmedia, have struggled with declining advertising revenues.
Postmedia reported a loss of $23.7 million, or eight cents per diluted share, during the third quarter of its 2016 fiscal year compared with a loss of $140.8 million, or 84 cents per diluted share, during the same quarter the previous year.
Its revenue for the quarter ended May 31 totalled $218.3 million, up from $205.1 million a year ago, boosted by the company’s acquisition of Sun Media’s English-language newspapers and digital properties last Spring.
Excluding the Sun deal, revenue was down 12.9 per cent, which Postmedia blamed on declining print advertising, print circulation and digital revenue.
Postmedia has attempted to come up with new ventures to boost revenue, like striking deals with two fintech companies for revenue in exchange for ad space. It’s made such deals with Agility Forex Ltd. and Mogo Finance Technology Inc.
It’s also embarked on significant cost-cutting measures. In April, it said it would reduce costs by $80 million by the middle of next year. Earlier this year, Postmedia cut approximately 90 jobs and merged newsrooms in four cities.
Godfrey said any savings from its financial restructuring will likely be invested in its digital services.
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