Postmedia Looks to Reduce Debt by $300 Million in Proposed Deal


Major Creditors Would Own 98% of the Company

CBJ — Postmedia management has come to an agreement with the majority of its bondholders and shareholders that would see the primary lenders become majority owners of the company, and wipe out $307 million worth of debt in the process.  As of now more than 80% of the debt holders are on board with the deal, but the completed transaction must be agreed upon by all stakeholders before September.

The newspaper chain announced a “recapitalization transaction” that will see bondholders get 98% of the equity of the company, leaving existing shareholders at just 2%.  On the surface that may seem unfair to those existing shareholders, but given that the stock is now essentially worthless, having 2% ownership of a possible turnaround is the better option. At its peak, Postmedia shares were worth more than $15, but are now worth about 2 cents.

The complex transaction, spearheaded by CEO Paul Godfrey, effectively allows the company to shore up its balance sheet by eliminating a good portion of its large debt load.

The company insists its operations will be unaffected by the deal, although there is more than a bit of skepticism in that regard. While there may not be significant layoffs on the horizon, it’s expected that retiring workers won’t be replaced, with their responsibilities added to the daily duties of others.

One type of debt holders will get a $78 million payment in exchange for delaying their repayment schedule of the remaining $225 million for five more years. A second tier of lenders, who collectively are owed $268.6 million US, will instead become shareholders, and own 98% of the new company. The company will receive $110 million worth of new financing, that must be repaid by 2023.

Postmedia says it has the support of more than 80% of its debt holders, and three-quarters of its shareholders, for the deal. But the transaction must get approval from all stakeholders later this summer before it can be finalized.

The deal came on the same day that Postmedia posted quarterly results. Revenue rose more than six per cent to $218 million, but still posted a net loss of $23.7 million. That compares with a loss of $140.8 million during the same period a year earlier.


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