DBRS Places Canwest Media and Canwest LP Ratings Under Review with Negative Implications

DBRS has today placed the ratings of Canwest Media Inc. (Canwest Media or the Company) and Canwest Limited Partnership (Canwest LP) Under Review with Negative Implications.

This rating action follows the release of the Company’s Q1 F2009 results yesterday, which included (1) greater operating pressure than DBRS had anticipated and (2) a caution that given the Company’s outlook for the year, it may not be able to meet its financial leverage ratio covenants in F2009. As a result of these factors, DBRS remains concerned that the Company’s liquidity and financial risk profile could continue to be increasingly pressured.

DBRS expects to focus its review on the following factors:

(1) The ongoing revenue and EBITDA pressure on Canwest Media’s underlying businesses, including the impact of the more pronounced pressure in the Canadian advertising market.

(2) The remitted cash flow of Canwest Media’s subsidiary operations, which, in addition to Canwest Media’s underlying businesses, support the debt at this level.

(3) The Company’s overall financial flexibility and liquidity given the expectation that it may not meet its debt covenants and any strategies it may implement to increase profitability and reduce debt levels.

(4) The impact on Canwest LP’s newspaper operations driven by pressure in the Canadian advertising market along with the ongoing structural pressure from a movement of advertisers to digital and online formats.

As part of this review, DBRS expects to determine whether the current B (high) and BB (low) Issuer Ratings are appropriate for Canwest Media and Canwest LP, respectively, in addition to the recovery and instrument ratings on the various debt instruments of these two issuers.

Unless the Company can demonstrate significant and immediate measures to increase its profitability and to reduce its leverage, the Company’s ratings are likely to be lowered at the conclusion of DBRS’s review.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Media and Entertainment, which can be found on our website under Methodologies.

This is a Corporate rating.