By: Mark Fitzgerald
Only last week, Sun-Times Media Group (STMG) executives were telling analysts they were hopeful a plan being worked out in Toronto could salvage some of the $48 million in Canadian asset-backed commercial paper the Chicago Sun-Times parent has been unable to redeem since August.
But the committee of investors that crafted a complicated plan to restructure the investments failed to meet a March 14 deadline to line up approval by Canadian banks. Monday, an Ontario Superior Court judge has put the entire sector — representing some $32 billion of commercial paper — under, effectively, bankruptcy protection.
What that means for struggling STMG is unclear at this point. A spokesperson for the group of about 100 Chicago-area papers said it had no comment on the court action.
Asset-backed commercial paper, or ABCP, is a short-term investment vehicle where corporation typically park money for 90 to 180 days. The investor group has been trying to get banks to back a plan to swap the short-term paper for longer-term debt.
STMG bought paper from non-bank dealers — a market that dried up in August when several big trusts were unable to renew maturing debt on investor fears about the U.S. subprime mortgage market.
The amount STMG was holding in the paper is nearly as much as the $50 million it committed to wring out of operating expenses by next June. To meet that goal, the company has laid off employees, consolidated or folded some community papers, and outsourced circulation and advertising preparation.
Since the Canadian commercial paper market collapsed, STMG has written off 25%, or $12 million, of the investment, CFO Bob Barker noted to analysts last week.
The Ontario court action freezes the investments, and will prevent a fire-sale of the notes, the investors group contends.
At least one analyst, quoted by Bloomberg, agreed.
“We view this announcement as positive for ABCP holders, since it reduces the near-term risk of a disorderly liquidation,” RBC Capital Markets analyst Andre-Philippe Hardy wrote in a note to investors quoted by Toronto-based reporter Doug Alexander.