Source: The Canadian Press

TORONTO — Canwest Global Communications Corp. (TSX:CGS) faces an uncertain future as it hurtles towards its April debt deadlines, and that's affecting the stock of its competitors, according to industry observers.

A report from Desjardins Securities says Corus Entertainment Inc. (TSX:CJR.B) and Astral Media Inc. (TSX:ACM.B) are feeling the heat from the possibility that Canwest could go under if it misses its latest round of commitments and is forced to sell its prized specialty channel assets.

That, coupled with an overall downturn in advertising spending, is affecting all of the broadcasters, including Corus and Astral, said Eric Bernofsky of Desjardins in the note.

"While our longer term thesis on both Corus and Astral has not changed - we still believe they are the two best positioned media companies in Canada - we believe there are a number of near-term risks that may weigh down their share prices," he said.

Bernofsky wrote that until the Canwest resolves its debt troubles "we expect a slight overhang on both stocks due to investor concerns over what kind of premium may be paid for CanWest's specialty TV assets."

Canwest is required to meet an April 7 deadline to amend the terms of its credit with senior lenders, and also an April 14 deadline for its missed interest payments to bondholders, who hold US$761 million in debt.

Unless the CRTC or Ottawa provide the company with a bailout plan, or the company experiences a sudden boost in its business, CanWest could be forced to sell off more of its assets.

All of these unanswered questions are causing ripple effects throughout the entire broadcasting industry, suggested media analyst Carmi Levy of AR Communications Inc.

"It puts a damper on advertisers who are more reluctant to place bets with any media organization," he said.

"They're less willing to sign on the dotted line because that organization may run into trouble six months from now and may start jettisoning properties."

Both Canwest and competitor CTV claim the CRTC's decision last fall to deny fee-for-carriage charges that would have provided up to another $300 million for broadcasters, the companies are now facing financial strife and contemplating closing down some stations.

So far, Corus has only made minor job cuts at some operations, while Astral hasn't announced any layoffs.

However, Bernofsky said investors shouldn't expect either company to dive into any Canwest asset sale.

He said while specialty assets tend to gain 10 to 15 times their EBITDA (earnings before interest, taxes, depreciation and amortization) when they're acquired, buying specialty channels would dilute both Astral and Corus' stocks, which are trading at seven times EBITDA.

"If Canwest puts its specialty TV stations up for sale, don't expect Astral or Corus to buy the lot," he wrote.

Bernofsky revised his ratings on both Corus and Astral to a "Hold (Average Risk)" on the downside risk.

© The Canadian Press