Is Compromise Coming in CanWest-Goldman Spat?

Includes: CWGVF, GS
by: Streetwise Blog

By Andrew Willis

On the eve of a crucial court date, CanWest Global Communications Corp. (OTC:CWGVF) and Goldman Sachs Group Inc. (NYSE:GS) continue to trade barbs, but the investment bank is also hinting at a compromise solution to the increasingly bitter battle over CanWest’s specialty television unit.

Lawyers for CanWest and Goldman are scheduled to appear in Ontario Superior Court on Tuesday to sort out conflicting claims on ownership of CW Media, a CanWest division that is home to 13 lucrative TV networks, including History Televisions and Showcase. The unit is co-owned by the Winnipeg-based media company and the New York-based investment bank.

The day before filling for court protection from creditors, CanWest closed down a numbered company that served as a buffer between the debt-heavy parent and CW Media, which has its own balance sheet, and is not included in CanWest’s creditor filing. Goldman is asking the court to overturn that move, and alleges it has been frozen out of restructuring talks.

Goldman is also attempting to get the court to reel back $426 million that CanWest distributed to the distressed debt funds, prior to filing for creditor protection.

CanWest claimed in court filings that it needs tight control of CW Media to prevent Goldman from selling the unit, which it describes as a crown jewel,” and that the U.S. investment bank has only made recapitalization offers that are in its own best interest. The company also said the decision to give cash to its lenders - the money came from sale of CanWest’s Australian TV network - was in the best interests of all stakeholders.

The latest court filings from Goldman, made on Friday, dismiss CanWest’s claims as “thoroughly disingenuous.”

“The offer of assistance from [Goldman ] was not only rejected, but also led to our isolation and closing of communications channels between [Goldman] and CanWest,” said Goldman managing director Gerald Cardinale in a court document.

Goldman claims that a handful of U.S. distressed debt funds are now calling the shots at the Canadian media company, to the detriment of other players. Mr. Cardinale said: “CanWest handed control of key restructuring decisions to certain noteholders (sic) who appear to have exploited that control for the exclusive benefit of the noteholders.”

However, the court filing on Friday provide the first trace of potential horse-trading between the two sides, as Goldman offered to suspend its right to sell the specialty TV business if CanWest rebuilds the walls that keep this division separate from television units that are under creditor protection.

“If asked, [Goldman] would have temporarily agreed to suspend any sale to permit CanWest to consider its restructuring options,” said Mr. Cardinale, and he said if that numbered company was resurrected, Goldman would discuss the terms of a standstill on CW Media’s ownership.