Montreal, - Sun Media Corp. is raising nearly $700 million in financing deals to help the newspaper publisher eliminate other debt and pay its parent company Quebecor Media a dividend of $220 million.
Sun Media announced Thursday it will issue $200 million US (about $310 million Cdn) in corporate bonds while entering a new bank credit deal of $385 million. The $693 million raised from those moves will be used to fully repay Sun Media's borrowings under its existing bank lines, redeem its outstanding corporate bonds and pay the $220 million dividend to Montreal-based Quebecor Media.
Sun said debt-ridden Quebecor Media will use $150 million of the dividend to reduce the long-term debt of its Videotron unit, Quebec's largest cable TV operator, and the other $70 million for operating funds.
Quebecor Inc. spokesman Luc Lavoie said the refinancing was possible because Sun Media, one of the best performing publishers in the country, has a higher credit rating than Quebecor Media, a Quebecor subsidiary which is hamstrung by a large debt.
``In refinancing like this, we removed a series of barriers that prevented the cash from Sun Media to flow upwards to Quebecor Media,'' Lavoie said in an interview.
Quebecor Media has 15 newspapers, including Sun Media tabloids in Toronto, Ottawa, Edmonton and Calgary, dailies in London, Ont., Brockville, Ont., Grand Prairie, Alta. and elsewhere, and French-language papers in Montreal and Quebec, including the provincial leader Journal de Montreal.
During the first nine months of 2002, the subsidiary's operating profits grew by 17.9 per cent over the same period the previous year, to $156.2 million.
Lavoie noted that the Moody's bond rating assigned Sun Media a Ba2, above the B1 rating for Quebecor Media, allowing the tabloid chain to get lower borrowing costs when it raises money.
Quebecor Media has a debt of about $4 billion. It has to pay back $429 million of this, related to Videotron, by March 31.
``We're starting the year with a big debt reduction of $150 million,'' Lavoie said. ``There aren't many companies these days in our sector who manage to cut their debt.''
Quebecor class B shares gained $1.06 Thursday to close at $16.05 on the Toronto Stock Exchange.
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