I’ve been sort of passively paying attention to the constantly moving deadlines that CanWest Global keeps being granted to shore up its debt. However, I really lack the technical savvy to understand why CanWest keeps getting a stay of execution. So I asked my business partner — who most people know only as @WanyeGretz — what the deal was. What follows is the conversation we had about it over email:
Can you explain to me why CanWest keeps getting a stay of execution?
It’s a big entity. The powers that be don’t want the national newspaper chain to go down for obvious societal reasons. Plus it’s a large debt. You know the old saying -– owe the bank a million dollars, it’s your problem. Owe the bank a hundred million, it’s the bank’s problem.
So, when a company gets as large as CanWest, is there essentially no way it could crumble, simply because it’s so much a part of society/the banking system’s fabric?
I would say that it is going to be given every opportunity to reorganize itself. There may be viable parts of the business that can continue to operate and if they sold off crappy papers at reduced prices, these smaller debt obligations would allow them to continue to operate with new owners. Basically the company will be allowed to fall to 30% of its value because that beats 0%.
In the meantime they will be strongly encouraged to shed expenses. This will be what kills them in the long run as they will dramatically alter their business model for short term savings. Then the internet eats them for lunch and they had better hope that they get a strong online presence and can then continue to run the papers as a loss leader with the bulk of their revenues in 15 years coming from online sources.
It’s a market transitioning that will be given ample time to do so. Same with automobiles and banking. The fact this is occurring during this recession buys them more time as the big lenders are being more patient than usual with so many loans on shaky ground.
All of this wisdom from the same man who bought both Soulja Boy Tellem albums yesterday. What a renaissance man!