Lawyers for Canwest, Goldman Sachs clash over specialty television unit

CanWest News Service
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TORONTO - A battle between Canwest Global Communications Corp. (TSXV:CGS) and its investment partner Goldman Sachs grew a little more tense on Tuesday when a Canwest lawyer suggested the fight over its specialty television assets could hinder the restructuring of the entire company.
Lyndon Barnes told a judge presiding over the media conglomerate's court-supervised restructuring that a disagreement with Goldman Sachs over the ownership of a division that holds specialty TV assets is a move by the investment bank to gain an unfair advantage in the process.
"It will affect not only people involved, but it's having a detrimental effect on the restructuring," he said.
The Winnipeg-based conglomerate filed for creditor protection for a portion of its business earlier this year after it was unable to meet repayment obligations for $4 billion in debt.
Goldman Sachs claims that after filing with the courts, Canwest shut down a numbered company that housed the specialty TV assets that both companies hold a stake in. The lucrative specialty channels, which include HGTV, Showcase and Diva, were acquired by the two companies from Alliance Atlantis in 2007 as part of a joint agreement.
The New York-based firm contends Canwest broke the terms of that agreement when it started tinkering with the division, shifting its assets into another piece of the company.
Canwest has stated in its own court documents that the specialty TV assets - which it calls its "crown jewels" - need to be tightly controlled by the company, or they risk being sold by Goldman.
Goldman suggests the move could be a way for Canwest's creditors to tighten their control on the specialty channels and has asked Justice Sarah Pepall to overturn the change.
Pepall reserved her decision Tuesday after arguments were heard from both sides.
A judge can reserve a decision for weeks or even months as they wade through the facts and arguments of a case, however in the case of Canwest a decision will likely be rendered quickly because of the timeline facing the company's restructuring plan.
Canwest also owns the Global Television conventional TV network as well as the National Post and several other large-market daily newspapers.
A lawyer for Goldman Sachs insisted the investment bank wasn't intentionally trying to slow down the restructuring process.
Goldman wants to "undo the manipulation," lawyer Kevin McElcheran told the judge.
The U.S. investment firm is also looking to reverse a $426-million payment Canwest made to noteholders before it filed for creditor protection.
In documents filed with the court, McElcheran said Goldman wants the judge to ensure that any future discussions between the two companies be under the stipulation that Goldman retains as much of a say as it had before Canwest filed to put parts of its business under creditor protection.
"This is a necessary first step to any fruitful discussions between the applicants and the (Goldman) parties," the filing said.
Goldman Sachs managing director Gerald Cardinale portrayed the investment firm as "willing and able" to discuss "potential solutions" to Canwest's financial problems back in March.
Cardinale wrote in court documents that he approached Canwest executives earlier this year "to make a restructuring proposal in good faith and with the intention of offering a solution that responded to Canwest's crisis."
However, those talks fell apart and Cardinale suggested that Goldman Sachs's financial advice likely caused Canwest to push the investment firm further away.
Canwest lawyer Barnes said Tuesday that Goldman Sachs is looking out for "just themselves" instead of other creditors as well.
"They don't like what happened - most creditors don't like what happened," he argued.
Barnes added that unlike other creditors who are owed unpaid bills or other debts, "Goldman hasn't lost anything at the moment."
Canwest is working to restructure its operations by the end of January.

Organizations: Canwest, Goldman Sachs, Alliance Atlantis Global Television National Post

Geographic location: TORONTO, U.S.

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