Postmedia is pressing its case for an easing
of newspaper foreign ownership restrictions as it faces U.S. currency
debt repayment burdens CEO Paul Godfrey has likened to a “noose around
your neck,” sources say.
They said Godfrey
and Postmedia chair Rod Phillips were to have met with a senior
political adviser to Prime Minister Justin Trudeau this week to discuss
possible changes to long-standing cultural protections that bar majority
control of media companies by foreigners.
An industry insider who spoke off the record
said the executives believe that if Toronto-based Postmedia is forced to
seek creditor protection the company could be broken up, with newspaper
assets sold off to U.S. hedge fund creditors in a debt for equity swap.
Under that scenario, bidding would be opened
to U.S. and other foreign interests so that holders of long-term
Postmedia Network Canada Corp. debt would have a better chance of
recouping all or most of their investment.
An easing of the ownership restriction could
also alter Tax Act provisions that prohibit advertisers from writing off
spending on print advertising if the property is not majority owned by
Canadians.
In an interview, Godfrey noted that he is on
record supporting lowered ownership restrictions in the newspaper
industry, but would not confirm that a meeting was held to advocate for
the move.
“I report to my board first and foremost,”
Godfrey said Thursday. “What my goals and objectives are for this
company will be revealed. . . When I’m ready to say them publicly, I’ll
say them publicly.”
Postmedia, Canada’s largest English language
news media company and proprietor of broadsheet dailies that include the
National Post and the Ottawa Citizen, has, since 2012, retained the
services of David Angus of the Ottawa lobby firm Capital Hill Group Inc.
Angus is charged with pressing for changes to ownership rules. He did
not respond to an interview request.
But observers said the ownership issue takes
on new urgency given the woes of the industry and the continued
operating losses at Postmedia on a deep slump in print ad revenue and
acquisition costs.
Postmedia said this month that it is merging newsrooms and cutting jobs as part of an effort to save $80 million
by the middle of next year, while Moody’s Investors Service has further
downgraded its ratings on the company, citing a “lack of confidence
that [Postmedia] will be able to refinance its 2017 and 2018 debt
maturities at par.”
“What’s really hurtful to us (is the)
second-lien notes are all in U.S. funds,” Godfrey told The Canadian
Press in an interview. “With the Canadian dollar falling the way it’s
falling, that’s almost like a noose around your neck.”
Godfrey in 2010 assembled an investment group
to bid for the chain of newspapers being sold by financially stressed
CanWest and secured backing from investors including U.S. private-equity
firm GoldenTree Asset Management, while a dual share structure
maintained majority Canadian ownership.
Postmedia in 2014 announced a deal to acquire the English language properties of the Sun Media chain.
NDP industry critic Brian Masse said he’s not
sure if newspaper industry issues are front and centre for the Liberal
government, but said they should be.
He added that easing of ownership rules
designed to guard cultural industries is a “fair discussion to have” in
light of the emergence of digital news alternatives, but warned that
foreign control could lead to an infiltration of offshore biases into
Canadian editorial content.
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