Corus Entertainment Inc T.CJR.B

CORUS WORTHED AT LEAST $0.50/per share in restructuring deal

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Globe sees Quebecor as best potential owner of Corus

2024-10-17 08:21 ET - In the News

The Globe and Mail, in its Thursday, October 17, 2024 edition, ponders who is better qualified to run one of the country's largest television and radio networks: Pierre Karl Peladeau or a vulture debt fund. The Globe's Andrew Willis writes that this is a critical question for regulators as restructuring talks at Corus Entertainment continue. The answer is clear: Mr. Peladeau, the chief executive officer of Quebecor, is by far the best potential owner of Global TV. Corus Entertainment consists of several well-known media properties but is struggling with a significant debt burden. Past acquisitions have left the company owing lenders $1.05-billion. Corus breached its debt covenants this summer and is negotiating a restructuring with its lenders, led by the Royal Bank of Canada and Toronto-Dominion Bank. Although the latest deadline for negotiations has passed, Corus confirmed it still has access to credit and will update investors on its discussions when it releases financial results on Oct. 25. Mr. Peladeau and his colleagues at Quebecor have been stalking Corus since January. At the right price -- which analysts calculate is at least 60 per cent below the face value of Corus's debt -- Quebecor sees the potential to reboot Global TV.


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Quebecor pushes for debt reduction in bid to acquire Corus assets amid restructuring

Corus faces a potential takeover as Quebecor seeks a 60% debt write-off to finalize the deal

By Freschia Gonzales Oct. 01, 2024


Quebecor Inc. is urging lenders to take significant losses on loans owed by Corus Entertainment Inc. as part of its bid to acquire the company’s national televisionand radio assets, reports The Globe and Mail.

Quebecor is asking banks and credit funds to write off 60 percent or more of Corus’s $1.05bn debt in a restructuring move aimed at facilitating the acquisition.

Corus’s lenders, led by Royal Bank of Canada (RBC) and Toronto-Dominion Bank (TD), have extended the deadline for a debt relief agreement to October 15, rather than immediately accepting Quebecor’s proposal.
According to analysts, investment bankers, and media executives, this extension allows Corus more time to address its financial difficulties without forcing lenders to accept significant loan losses.

Quebecor, led by CEO Pierre Karl Pladeau, first expressed interest in acquiring Corus in January. However, a deal remains contingent on lenders agreeing to a significant debt write-off.

Sources indicate Quebecor is pushing for a court-supervised creditor restructuring, though Corus has yet to enter serious takeover talks. Analysts suggest other options are available to Corus, such as selling assets or engaging in a debt-for-equity swap with noteholders.

Corus currently owes $312m in loans secured against its assets, while an additional $750m in unsecured notes matures in 2028 and 2030. As of last week, these notes were trading at 40 cents on the dollar, signalling investor expectations of a restructuring.

Maher Yaghi, an analyst at Scotiabank, noted, “If Quebecor were to make a bid, we would expect it to occur within a debt-restructuring initiative. We don’t think Quebecor would pay north of $400m in enterprise value for Corus.”

Corus’s enterprise value currently stands at $1.08bn, with its stock trading at 16 cents, valuing its equity at $32m.

Despite generating $18m in free cash flow during the three months ending May 31, Corus has experienced revenue declines in recent years due to competition from streaming services and tech giants such as Alphabet and Meta.

Analysts have expressed caution about Quebecor acquiring Corus, given the ongoing shifts in the television market.

Aravinda Galappatthige, an analyst at Canaccord Genuity Capital Markets, noted, “We believe that for a transaction to make financial sense for Quebecor, the debt would need to be restructured,” with the senior notes trading “well below par.”

Quebecor sees Corus’s financial troubles as an opportunity to acquire assets, such as Global Television Network, 32 specialty channels, and 39 radio stations.

However, both BCE Inc. and Rogers Communications, owners of rival networks, have stepped away from acquiring Corus, focusing on other priorities.

Quebecor has also shown interest in leveraging its media assets to promote Freedom Mobile, which it acquired for $2.85bn last year from Shaw Communications Inc.

Despite these factors, analysts question whether Quebecor’s strategy will succeed. Yaghi expressed concerns that TV revenues may continue to decline, and Quebecor should focus on its telecom assets.

Corus’s current debt challenges date back to its 2016 acquisition of Global TV and other specialty channels for $2.65bn from Shaw Communications.

Recent setbacks, such as the loss of Canadian rights to five Warner Bros. Discovery channels, including HGTV and Food Network, have further strained the company’s position.

CORUS lenders should require immediate assets sales.