TORONTO - Restructuring media giant Canwest Global Communications says it will be forced to shut down the unprofitable National Post if the newspaper's operations aren't shifted into a company that holds its other newspapers by Friday.
The company said in court documents that its creditors refuse to keep funding the Post, which continues to suffer significant operating losses. A hearing on the matter is scheduled for Friday in Toronto.
A number of Canwest divisions, including the Post, are operating under creditor protection. The company said without court approval to move the Post under the umbrella of the Canwest Limited Partnership - which holds a stable of daily newspapers including the Montreal Gazette, Ottawa Citizen and Edmonton Journal - it would be forced to shut down the national paper and lay off its 277 employees immediately.
"Since its inception in 1998, the National Post has never generated a profit and it continues to suffer significant operating losses," Canwest said in the documents.
Chief financial officer John Maguire said in a statement included in the documents that the Post has racked up about $62 million in losses over the past four years before factoring in interest, taxes, depreciation and amortization.
The Post company also owes $139.1 million to Canwest Media, its holding company, because it helped the company with payroll, capital expenditures and operational losses.
"Canwest wants to put pressure on the court to do the deal and transfer the assets," said media analyst Carmi Levy of AR Communications Inc.
"As part of its effort to underscore how critical this is, it's sort of floating this threat. But it's just as likely that it's exactly that - all a threat. You can very easily see it as a very strong, very hard-edged negotiation tactic."
In the court filings, Canwest outlined an intricate operating system between the Post and the other newspapers it owns in the Limited Partnership, which is not included under creditor protection.
The Winnipeg-based company said those operations extend from content sharing agreements for news stories to integrated payroll and customer support services, and that shutting down the Post would hurt all of the newspapers.
In Friday's hearing the court will need to consider whether the Post is so integral to the other papers that it needs to continue operating.
Canwest says moving it into the same division as the papers would also help the Post keep its costs down.
Back when Canwest's newspaper division was spun off in 2005, the National Post was excluded from the shift because it was unprofitable and as a result "unsuited for inclusion in an income trust," according to Canwest.
Meanwhile, the Post stayed fully owned by Canwest under the National Post Company.
Canwest filed for creditor protection earlier this year as it succumbed to nearly $4 billion in debt, most of it from the purchase of Conrad Black's newspaper assets in 2000 and the group of specialty channels from Alliance Atlantis in 2007.
The company tried to avoid creditor protection by selling off its lesser assets earlier this year, while keeping its most prized divisions.