Postmedia investors OK debt writedown
TORONTO• Shareholders and debt holders of Postmedia Network Canada Corp. voted Wednesday in favour of the newspaper giant’s proposed plan to slash its $ 648 million debt by $307 million.
In July, the company announced a “recapitalization transaction” which will give bondholders 98 per cent of the equity in the company in exchange for writing down $ 345 million in debt, leaving its existing shareholders with only two per cent.
The restructuring, which is being conducted under a corporate plan of arrangement, requires final approval from a judge on Sept. 12.
If the plan is approved by the court, Postmedia will also be required to make a $ 78 million payment to its first lien debt holders, who will delay their repayment schedule for an additional $ 225 million outstanding until 2021.
The company will also raise $ 110 million in new financing, due to be repaid in 2023, in part from New Jersey- based hedge fund Chatham Asset Management.
Postmedia, which owns the National Post, said the deal will result in $ 50 million in annual savings in interest charges alone. The company’s first lien debt holders, second lien debt holders and shareholders all voted in favour of the restructuring plan, which required at least two- thirds of the votes cast at separate meetings held by each group.
Support for the plan of arrangement among all three groups was overwhelmingly in favour, with 99.9 per cent of votes by shareholders ( representing about 93 per cent of the outstanding shares), 100 per cent of votes by first l i en noteholders ( representing about 95 per cent of the first lien notes) and 100 per cent votes by second l i en noteholders ( representing about 80 per cent of the second lien notes) saying yes to the deal. When it announced the plan in July, Postmedia said it had secured the support of about 80 per cent of its first and second lien debt holders and about 75 per cent of shareholders.
Postmedia’s third-quarter financial statements, released in June, saw an increase in revenue by more than six per cent to $ 218 million, but that was not enough to stem a net loss of $23.7 million.
The newspaper publisher, like most of its industry peers, is struggling with the evaporation of traditional media advertising dollars and the competition of digital powerhouses Google and Facebook. The third quarter saw significant decreases in print advertising revenue of $ 14.7 million ( 19.4 per cent) and print circulation revenue of $ 3.1 million ( 6.8 per cent).
However, Postmedia’s digital revenue was more stable, with a marginal decline of $ 500,000 ( 2.4 per cent).
That led chief executive Paul Godfrey to suggest that new financial freedom afforded by the proposed transaction would be dedicated to digital.
“We will have the ability to invest more,” Godfrey said in a June investors call. “It will probably be in the area of the digital world rather than the print world. But everything at this time is hypothetical: The crystal ball we have is not totally clear.”