TORONTO - Canwest Global Communications Corp. (TSX:CGS) made a minor inroad on its debt payments on Thursday after receiving $34 million from Sun-Times Media Group Inc. from a settlement tied to an arbitration award.
However, the Winnipeg-based media giant is still facing numerous challenges as debt rating agency DBRS downgraded its ratings for both Canwest Media and Canwest LP to a ''C (high).''
Canwest had been awarded $50.7 million in January by an arbitrator after a dispute with the former Hollinger International, now Sun-Times, over adjustments related to the $3.2-billion takeover of Hollinger's Canadian newspaper group in 2000.
The companies said Thursday the $34-million payment settles the dispute.
Canwest said $30.5 million of the settlement will be deposited as collateral under its senior credit facility for Canwest Media Inc. The remaining $3.5 million will go towards Canwest Publications Inc., a subsidiary of Canwest LP.
However, DBRS senior vice president Chris Diceman remained cautious over how much the $34 million payment will benefit Canwest.
On Wednesday, Canwest received a reprieve from its bankers until April 7 and said it will not make a US$30.4-million interest payment on some its debt due this week.
''It might give the company a bit more flexibility, but I wouldn't suggest that would change the expectation they're not going to make that payment on Sunday,'' Diceman said in an interview.
''The company has run out of a number of options and is probably down to the point of either doing a recapitalization outside of bankruptcy protection or ultimately having to file for bankruptcy protection.''
Canwest has been under the gun to show lenders that it's making inroads in its struggle to repay debt.
The company has been hit hard by the both downturn in the broadcasting industry, which relies heavily on advertising, as well as debts it accumulated over the years because of various acquisitions.
Earlier this week the company sold American political magazine New Republic back to a group of investors which include the editor-in-chief for an undisclosed amount.
Canwest has also auctioned off its 26 per cent stake in sports broadcaster the Score for $6.62 million and hired an investment bank to find a buyer for the remaining $3.6 million in shares of Score Media Inc. (TSX:SCR).
The company's five E! network television stations are also on the auction block, and could be shut down if a buyer isn't found.
Canwest shares were ahead 1.5 cents to 31.5 cents on the Toronto Stock Exchange.