Toronto, - Standard & Poor's Ratings Services has lowered its credit and debt ratings on media company CanWest Global Communications Corp., citing the company's ``relatively weak financial profile.''
The big New York bond rater said Monday it has lowered the ratings on Winnipeg-based CanWest debt to B-plus from a BB-minus, with a stable outlook. The ratings downgrade means it will become more expensive for the company to raise capital in financial markets.
S&P; said that the positive impact of asset sales of $470 million in fiscal 2002, used to lower debt levels, has been largely offset by lower than expected operating profits the last two years, ``due to the economic environment and the company's acquisition of the National Post,'' which CanWest completed in mid-2001.
On the plus side, the agency noted CanWest's strong market positions and diversity afforded by its newspaper publishing and TV broadcasting assets.
S&P; expects that CanWest will continue to reduce losses at the Post and will have more asset sales to lower its multibillion-dollar debt.
CanWest acknowledged in a statement Monday that its operating results are below those anticipated when it acquired a one-half interest the Post, as well as other big Southam newspapers from Conrad Black's Hollinger group in November 2000 for $3.2 billion.
However, it attributes the downgrade to an over-reaction in financial markets to high- rofile corporate accounting scandals that battered energy trader Enron Corp. and telecom giant WorldCom this year.
``The company believes the ratings adjustments overlook the underlying consistent strength of the company's operations, and fail to take account of CanWest's improved financial profile over the past two years,'' CanWest said.
``In particular, the company's financial ratios have improved significantly and its business outlook is more promising than at any point in the past 12 months.''
Chief executive Leonard Asper said CanWest's debt reduction strategies and the sale of additional non-strategic assets in fiscal 2003, coupled with a sustained economic recovery, ``should provide a basis for a ratings upgrade in the medium term.''
CanWest lost $104 million in the fourth quarter ended Aug. 31. Net earnings for the year dropped to $13 million from $46.6 million, while revenues rose to $2.6 billion from $2.2 billion.
CanWest, which bought the other half of the post in August 2001, is the largest publisher of daily newspapers in Canada with average daily paid circulation of 1.5 million copies. It is also the second-biggest private broadcaster in Canada, after CTV Inc.
In another development Monday, CanWest revealed it is setting up a national news desk in Winnipeg to co-ordinate the exchange of stories and pictures from across the Southam chain of big papers from Vancouver to Montreal.
``The intention is to improve operational efficiencies and reduce duplication across the newspaper group, and to ensure that journalists working in the metro markets get more exposure throughout the chain,'' Kenneth Whyte, editor-in-chief of the Post, said in a memo to employees Monday.
``The new desk is essentially an extension and enhancement of Southam News Services. The plan is to start small and eventually have as many as 12 to 18 journalists.''
In trading on the Toronto stock market Monday, CanWest (TSX:CGS.S) shares fell nine cents to close at $5.21.
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