Monday, April 13, 2009

Fox Soccer Report's Parent Company Is in Trouble

Chalk up another victim of the global credit crisis.

I know that we don't usually cover Canadian corporate governance structures, but try to follow along closely: Fox Soccer Report, which is licensed and broadcast by Fox Soccer Channel in the U.S., is actually produced by Fox Sports World Canada, which is managed by Global TV, which is owned by Canwest Media Inc., which is owned by CanWest Global Communications Corp., which is in deep, deep financial trouble.

How deep? On Friday, Canwest took a C$1.2-billion writedown of its assets, which resulted in a C$1.4 billion loss for the second quarter of 2009. Ouch. (A "writedown" is where a corporation announces a one-time reduction in the value of its assets, i.e. net worth.) And, this was the second writedown for Canwest in the past six months, with the company having announced a C$1 billion loss in November 2008.

Things get even worse, because Canwest owes the banks an imminent C$30 million interest payment. The payment was originally due in March, but the bondholders have provided a series of extensions -- the most recent to April 21. What happens if Canwest can't make the interest payment? The bondholders have the right to demand repayment of C$761 million in principal. And if Canwest can't make the payment? It's likely off to bankruptcy.

This latest interest payment might only be delaying the inevitable, because Canwest expanded rapidly over the past few years and as a result is carrying a whopping C$4 BILLION in debt. Most of this is due to Canwest's purchases of Canadian newspapers. Whoops.... Too bad the publishing industry is completely in the tank. At least one financial analyst thinks that Canwest is already "done."

And now for the important part: What does this mean for Fox Soccer Report? We've sent emails to Canwest's PR department, but so far have not heard anything back (we'll put up an update if we do). All we know is that, even if Canwest can stave off bankruptcy, it is spinning off any and all profitable assets. Could this include Fox Sports World Canada? The channel broadcasts Fox Soccer Report, Sky News, Serie A matches, the occasional USL game... and that's it. Oh, and the channel costs an extra C$2.99 a month to subscribers.

Here's the key to the whole equation: What does Fox Sports International want to do? Don't forget that Fox Soccer Channel (the U.S. channel) is owned by a separate entity, Fox Sports International, which licenses the rights to show Fox Soccer Report in the U.S. Does Fox Sports swoop in to purchase Fox Sports World Canada from Canwest? Does Fox Sport purchase only Fox Soccer Report? Or does Fox Sports use this as an excuse to produce a brand new program in the U.S.?

We'll just have to wait and see how this plays out. In the meantime, it's clear that things are bleak at Fox Soccer Report's parent company.


The Fan's Attic said...

I didn't even know they had newspapers in Canada.

Jason D said...

Is it a bad sign that Jeremy St. Louis is tweeting a link to this post? Hang in there Jeremy!