DBRS Downgrades Canwest Media to C and Canwest LP to C (high), Ratings Remain Under Review-Negative

DBRS has today downgraded Canwest Media Inc.’s (Canwest Media or the Company) Issuer Rating to C from CCC along with its various debt instrument ratings. At the same time, DBRS has downgraded Canwest Media’s wholly owned subsidiary, Canwest Limited Partnership (Canwest LP). Canwest LP’s Issuer Rating has been downgraded to C (high) from CCC (high) along with its various debt instrument ratings.

All ratings remain Under Review with Negative Implications, pending the outcome of a recapitalization of Canwest Global Communications Corp. (Canwest). The ratings were originally placed Under Review – Negative following DBRS’s previous downgrade of Canwest LP and Canwest Media on February 23, 2009. (See DBRS press release dated February 23, 2009, for more information.)

DBRS notes that while Canwest Media and its secured bank debt lenders have agreed to extend a waiver on certain covenants under its credit facility until April 7, 2009 (the previous waiver expired March 11, 2009), the Company has indicated that it will not make its March 15, 2009 interest payment on its 8% senior subordinated notes (approximately $30.4 million) and has commenced discussions with an ad hoc committee of these noteholders.

DBRS notes that this committee represents a majority of the Company’s $761 million of notes outstanding with Canwest Media having a 30 day cure period (which would end on April 14, 2009) to make this interest payment before these noteholders can issue a default notice.

Canwest Media believes that discussions with these noteholders are aimed at allowing sufficient time to recapitalize Canwest in a manner that is satisfactory to all of its stakeholders, including its senior lenders and noteholders. As such, today’s downgrade reflects DBRS’s expectation that a recapitalization could include both Canwest Media and Canwest LP (and possibly other entities within Canwest). DBRS notes that Canwest Media’s probability of default is greater than that of Canwest LP, hence its Issuer Rating is rated lower at C versus Canwest LP’s C (high) Issuer Rating.

The recovery rating for Canwest Media’s Secured Bank debt remains unchanged at RR1 indicating anticipated recovery prospects of between 90% to 100%. As a result the Secured Bank Debt rating has been lowered to CC from B which remains three notches above Canwest Media’s C Issuer Rating. Furthermore, the recovery rating on Canwest Media’s Senior Subordinated Notes remains unchanged at RR5 indicating anticipated recovery prospects of between 10% to 30%. As a result, the Senior Subordinated Notes rating of Canwest Media has been lowered to C (low) from CCC (low) which remains one notch below Canwest Media’s C Issuer Rating.

For Canwest LP, the recovery rating remains unchanged at RR3 indicating anticipated recovery prospects of between 50% to 70%. As a result the Secured Bank Debt rating has been lowered to CC (low) from B (low) which remains one notch above Canwest LP’s C (high) Issuer Rating. Additionally, the recovery rating of Canwest LP’s Senior Subordinated Notes remains unchanged at RR6. As a result, the Senior Subordinated Notes rating of Canwest LP has been lowered to C (low) from CCC (low) which remains two notches below Canwest LP’s C (high) Issuer Rating.

As part of its review, DBRS expects to continue to monitor Canwest’s negotiations in terms of a recapitalization and its obligations to make its interest payments at all borrowing levels. DBRS expects its ratings at Canwest Media and/or Canwest LP will be lowered to a D rating (indicating a default) at the earlier of: (a) a default either during or following the expiry of any cure period; or (b) a formalized recapitalization plan where principal and interest obligations are compromised; or (c) the initiation of a formal bankruptcy proceeding.

Notes:
All figures are in U.S. dollars unless otherwise noted.
The Issuer Ratings reflect the probability of default.

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

This is a Corporate (Publishing & Media) rating.