DBRS Downgrades Canwest LP’s Subordinated Debt, Secured Bank Debt and Issuer Rating to D

DBRS has today downgraded the Senior Subordinated Notes rating of Canwest Limited Partnership (Canwest LP or the Company) to D from C (low) and its Secured Bank Debt rating to D from C (high). In addition, DBRS has discontinued its recovery rating on both instruments according to DBRS’s leveraged finance methodology. Prior to the downgrades, the recovery rating on the Senior Subordinated Debt was RR6 (indicating anticipated recovery prospects of less than 10%) and the recovery rating on the Secured Bank Debt was RR3 (indicating anticipated recovery prospects of 50% to 70%).

The downgrade of the Senior Subordinated Notes follows the Company’s failure to make approximately US$18.5 million in interest payment on its US$400 million 9.25% notes, originally due on August 1, 2009. When this payment was not met in August, a 30-day cure period was triggered, giving the Company additional time to make this payment before a default occurred. Since the cure period (according to the indenture that governs these notes) expired on September 1, 2009, and no interest payment was made, DBRS methodology considers this a default.

The downgrade of Canwest LP’s Secured Bank Debt follows its failure to make interest and principal payments on the credit facility since May 2009. Canwest LP has indicated that it does not have adequate liquidity to satisfy these and other payments and is in discussions with these senior lenders. This has resulted in the Company’s inability to make additional draws under this facility. As of May 31, 2009, the carrying value of the credit facility was $874 million, with an additional aggregate amount of $69 million owed to counterparties for hedging instruments.

DBRS notes that the non-payment of interest of the above securities is intended to provide Canwest LP with the ability to continue to operate its core newspaper business as it negotiates a recapitalization transaction at this level and at its parent, Canwest Media Inc.

In addition to the downgrade of the two instrument ratings, DBRS has today downgraded the Issuer Rating of Canwest LP to D from C as the Company has indicated that it does not have adequate liquidity to satisfy the payments of its Secured Bank Debt, Senior Subordinated Notes or any associated hedging derivative instruments. While a formal recapitalization or restructuring has not occurred, DBRS is of the opinion that Canwest LP’s Issuer Rating is now in default as defined in DBRS methodology.

The Issuer Rating at Canwest LP will remain at D until the earlier of (1) the implementation of an effective recapitalization plan; (2) the emergence from creditor protection, should it choose to file under the Companies’ Creditors Arrangement Act (CCAA); or (3) DBRS elects to withdraw this rating.

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.