DBRS Comments on Canwest Media Inc.’s New $175 Million Financing

DBRS notes that Canwest Media Inc. (Canwest Media or the Company) announced today that it has entered into an agreement to attain $175 million of new financing. The new financing, which is expected to close tomorrow, will allow the Company to repay amounts outstanding under Canwest Media’s secured credit facility (along with related obligations) and give it additional time to continue to pursue a recapitalization of Canwest Media’s US$761 million 8% Senior Subordinated Notes (the Notes).

As part of this agreement, the senior lenders have agreed to extend their current waiver until June 2, 2009 (the previous waiver expired May 19, 2009). DBRS expects to discontinue its current CC/RR1 ratings on Canwest Media’s current Secured Bank Debt once these obligations have been fully repaid. (This is expected to occur on or before June 2, 2009.)

DBRS notes that this new financing, along with a further forbearance agreement from the Ad Hoc Committee of its 8% noteholders until June 15, 2009, provides Canwest Media with additional time to continue to move toward a recapitalization of these Notes. Such a recapitalization, if successful, could significantly reduce the debt burden at Canwest Media. However, DBRS cautions that at this stage there can be no assurance that certain milestones will be achieved in the coming weeks, let alone a successful recapitalization.

DBRS notes that it lowered its rating on Canwest Media’s Senior Subordinated Notes to D on April 15, 2009, following the expiry of the 30-day cure period to make a US$30.4 million interest payment on these notes which was originally due on March 15, 2009.

The remaining ratings of Canwest Media remain Under Review with Negative Implications, as do the ratings of Canwest Limited Partnership (Canwest LP). DBRS does note that, as previously announced, Canwest LP has initiated discussions with its senior lenders to seek to amend its financial covenants through the remainder of F2009 (ends August 31, 2009). Canwest LP could breach the covenants under its Secured Bank Debt during the current quarter (Q3 F2009, which ends on May 31, 2009).

The new $175 million of financing that Canwest Media announced today consists of: (a) Canwest Media and Canwest Television LP jointly issuing $105 million 12% senior secured notes for $100 million to purchasers that include certain members of the Ad Hoc Committee; and (2) CIT Business Credit Canada (CIT) agreeing to provide a $75 million senior secured revolving asset-based loan to Canwest Media.

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 (Publishing & Media) rating.