National Post Could Close As Early As Friday

Canwest Global Communications will tell an Ontario court Friday that it will be forced to shut down the National Post, which has lost $62 million in the last four years, if the newspaper isn’t shifted into a company that holds its other dailies.

A hearing is scheduled for the matter on Friday afternoon at the Ontario Superior Court, only hours ahead of a deadline the restructuring media giant suggests could determine the fate of its biggest newspaper by circulation.

The company said in court documents that its creditors refuse to keep funding the Post, which continues to suffer significant operating losses.

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 owns daily newspapers including the Montreal Gazette, Ottawa Citizen and Edmonton Journal – it would be forced to shut down the Toronto-based national paper and lay off its 277 employees immediately.

The limited partnership of daily papers is not under creditor protection and continues to operate profitably.

“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.

It’s expected that the court will approve the shift of the Post from the holding company, Canwest Media, to Canwest Limited Partnership, partly because both the company and its creditors agreed to it earlier this week.

Separate from the transaction, the court documents also provide a rare glimpse into the 11-year-old newspaper’s finances, which have often been tied to rumours the paper was struggling to turn a profit.

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. Last year,

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.

Maguire also said that if the Post’s Toronto operations shut down, the company would lose an integral part of its news team, and be forced to pay about $500,000 each year to create or licence Toronto-based news content. The Post is also expected to spend $11.6 million on printing and distribution services from other units of Canwest in 2010, he added.

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.

Reports have suggested that Canwest will file for CCAA protection in its newspaper division if the Post transaction is approved.

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.