Moody’s: Canwest Likely In Rocky Talks With Bankers

Fitz: When Canwest skipped a C$10 million (US$9.17 million) principal and interest payment last Friday, it portrayed it as business as usual, a way for its Canwest Limited Partnership (CLP) unit to keep operating normally as Canada’s largest chain of English-language papers.

No worries, we’ll have a recapitalization plan in place by mid-July, the media giant said of its US$4 billion in debt.

On Friday, Moody’s Investors Service begged to differ.

Skipping the payment, Moody’s Toronto-based Senior Credit Officer William Wolfe said in a note, “suggests that CLP has chosen to force the issue  with its bank lenders, and is also likely an indication that ongoing negotiations with the bank lenders were not going well.”

Like Standard & Poor’s Ratings Services before it, Moody’s hung a limited default rating on Canwest, indicating it is rating only the US$1.3 billion credit facility the company stiffed.

The full release on Moody’s note is below the fold:

Moody's downgrades Canwest LP's PDR to Ca/LD on default news

Approximately $1.3 billion of rated debt affected

Toronto, June 05, 2009 -- Moody's Investors Service downgraded Canwest
Limited Partnership's (CLP) probability of default rating (PDR) to Ca/LD
and its corporate family (CFR) to Caa3 on news the company "has decided
to not make payments totaling approximately $10 million due under its
senior secured credit facility" on May 29, 2009, the end of the company's
fiscal quarter. This suggests that CLP has chosen to force the issue
with its bank lenders, and is also likely an indication that ongoing
negotiations with the bank lenders were not going well. Given the recent
experience of CLP's parent company, Canwest Media Inc. (CMI), this step
was likely unavoidable. Since the payment includes a principal component
and there is no cure period, the bank credit facility is now in default.
The lenders have not accelerated repayment.

The PDR's LD suffix indicates a limited default, i.e. only a component of
the company's debt structure is in default. The company's bond indenture
contains cross default/acceleration provisions with a $25 million
threshold. The missed payment is less than the threshold. Should
subsequent payments take the aggregate of missed payments beyond the
threshold or should bank lenders accelerate maturity - the entire
(approximately) C$1.065 billion bank credit facility is in default - the
bonds' cross default/acceleration will be triggered. The bond indenture
has a 60 day (post notice) cure for a default and a 30 day (post notice)
cure for acceleration. Given the significant potential for the company's
defaults to eventually involve all creditors, the ratings outlook is
negative. The rating actions effectively conclude a review initiated on
April 13, 2009.

Rating and Outlook Actions:

..Issuer: Canwest Limited Partnership

....Probability of Default Rating, Downgraded to Ca/LD from Caa2

....Corporate Family Rating, Downgraded to Ca from Caa2

....Senior Secured Bank Credit Facility, Downgraded to Caa3 (LGD3, 30%)
from B3 (LGD3, 30%)

....Senior Subordinated Regular Bond/Debenture, Downgraded to C (LGD5,
84%) from Ca (LGD5, 88%)

....Outlook, Changed To Negative From Under Review

For additional commentary, please refer to the associated Credit Opinion
(available on Moodys.com shortly after the date of this press release).

Moody's most recent rating action concerning Canwest LP was taken on
April 13, 2009 at which time the company's CFR and PRD were assigned as
Caa2 and placed on review.

The principal methodology used in rating Canwest LP is Moody's Global
Newspaper Industry rating methodology, which can be found at
www.moodys.com in the Credit Policy & Methodologies directory, in the
Ratings Methodologies subdirectory (September, 2008, document #110855).
Other methodologies and factors that may have been considered in the
process of rating these issuers can also be found in the Credit Policy &
Methodologies directory.

Canwest Limited Partnership is a Winnipeg, Manitoba based newspaper
publishing company that is wholly owned through Canwest Media Inc. by
Canwest Global Communications Corp. (a publicly traded international
media company with interests in broadcast television, publications,
radio, specialty television channels, out-of-home advertising and
interactive operations in Canada, Australia, Malaysia, Singapore,
Indonesia, the United Kingdom and the United States).