Postmedia – Investor Battle Over?
On June 7,
2016 Globe and Mail Report on Business columnist Andrew Willis said:
“The fate of the country’s largest newspaper
chain will be decided in a showdown between its two major creditors, a rough
and tumble New Your based distressed debt investor and a 15 employee bond fund
from the Toronto suburbs”
The news of
July 7, 2016 seems to imply that the showdown is over, and the fund from the
Toronto suburbs (Canso) came out as the clear winner over the rough and tumble
New Yorkers (Goldentree).
These high
finance deals can be tricky to interpret, but near as I can tell, the deal goes
something like this.
Canso Pre July 2016 Deal
|
Canso Post July 2016 Deal
|
|
First Lien Debt: Canso is
owed $313 million, @ 8.25% interest, due August 2017.
|
Canso gets $78 million payment, and $225 million is rolled over
until 2022
|
Goldentree Pre July 2016
Deal
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Goldentree Post July 2016
Deal
|
|
Second Lien Debt:
Goldentree is owed $363 million, @ 12.5% interest, due in 2018.
|
Most ($268 million) Goldentree debt is converted to shares in
Postmedia. They now become majority
shareholders, with current shareholder value being diluted accordingly.
|
It seems to
me that some money is missing here; only $268 million of the second lien debt
has been converted to shares, so $95 million seems to be unaccounted for, in
these reports. However, the deal is also
supposed to bring in $110 million in new capital, in the form of second lien
notes to come due in 2023, from New Jersey Chatham Asset Management. It beats me why they would want to throw
money at Postmedia – perhaps some sort of swap with Goldentree is involved,
that covers the missing $95 million.
That’s just a guess, though. Mind
you, Goldentree is reported to be “not involved at all” in the July 8 story in
the Globe and Mail.
The Globe
and Mail story also notes that “the plan of arrangement allows Postmedia to
avoid the prospect of declaring insolvency and filing for creditor protection
under the weight of interest payments, at least for the foreseeable future”.
So, the
upshot seems to be that the company can take the course of action once
recommended by Earnest Hemingway, in regards to bankruptcy:
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
If this deal holds up (it is voted on in August) Postmedia
seems to have bought a bit more time for Hemingway’s “gradually”.
By the way, my Postmedia paper didn’t arrive at the door
last Saturday. I didn’t bother phoning
about it – after all, current news of the Turkish attempted coup was available
on the web, anyway. Twitter was very busy with stories about Turkey, for example. I kind of missed the
Saturday and Sunday New York Times crossword puzzles, though, which they carry.
While these
big investment firms fight it out, you might want to consider an exciting
biking trip on the Kettle Valley rail-trail.
It’s the adventure of a lifetime, even more fun than big business. And if you are in big business, it’s a nice
stress reducer.
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