Sun-Times Media Group: We'll Get Our Cash -- Eventually

By: E&P Staff Sun-Times Media Group (STMG) -- seeking to reassure investors unsettled by last week's disclosure that $48 million in short-term investments have been stranded by the Canadian crunch in asset-backed commercial paper -- said Monday it believes that the pay-out of its money is only a matter of time.

STMG, publisher of the Chicago Sun-Times and dozens of other Chicago-area papers, said a consortium of banks, asset providers and investors in the Canadian asset-backed commercial paper market is working on converting unredeemed commercial paper into medium-term asset-backed notes. Unlike conventional commercial paper, which is backed by the corporation issuing the debt, asset-backed commercial paper is a short-term financial instrument backed by receivables such as mortgages.

"While there can be no assurance that this transition will be completed or that the principal of the investments will be protected, there is no expectation at this time that there will be a major capital loss," STMG said in a statement. "Our advisors and a number of bankers and individuals close to the market believe that the market issues are related to liquidity, rather than asset quality, and that investors are facing an extension of timing rather than a loss of capital."

STMG said that as of Friday, it had a total of $95 million invested in Canadian asset-backed commercial paper trusts, all of which have a top rating by a Canadian rating agency. The paper, the company added, has "no reported exposure to sub-prime mortgages," which have roiled global credit markets.

It said $36 million is invested with trusts sponsored by its investment advisor investment adviser CIBC World Markets, which has announced it will continue to provide liquidity to its trusts. "We therefore expect this $36 million to be redeemed on maturity, absent a major change in government or bank policy," STMG said.

The remaining $59 million is invested in third-party sponsored trusts -- two of which did not redeem its investments when they came due last week. STMG said it had $28 million in unredeemed investments in Ironstone Trust, and $20 million in Planet Trust.

Another $11 million invested in Lafayette Structured Credit Trust matures on Tuesday, but its payout is in doubt. "All previous Lafayette maturities have been redeemed, but we have not received any direct assurances that our investment will be redeemed on Tuesday," STMG said.

STMG said it has $65 million on deposit in short-term U.S. investments, including $45 million of AAA-rated money market mutual funds, and $20 million of A1/P1 rated commercial paper. "We expect these funds to be available whenever necessary," the company said.

"Sun-Times Media Group believes that it is managing its cash prudently and fully recognizes the importance of protecting its cash to the long-term survival and health of the company," STMG said. "While there can be no assurances that the Company will fully recover its principal from its Canadian investments, the company believes at this time that its risk is primarily one of timing rather than one of capital loss. The company believes that the potential delay in recovering funds from its Canadian investments should not impact its liquidity or operations."

The company said it intends to transfer the majority of its Canadian excess cash to the U.S. "in a cost-efficient and tax-efficient manner as it becomes available for transfer."

More information about the proposed conversion of Canadian asset-backed commercial paper to medium-term notes is available at this Web site .