Corus Entertainment Inc. CJR-B-T has another five months to solve its debt crisis, though the company appears no closer to finding a solution to the dire financial situation it first disclosed in mid-July.
Toronto-based Corus, which owns Global News as well as dozens of television and radio stations across Canada, announced a new agreement with its lenders on Friday alongside its latest quarterly results. The deal with its bank group – which is led by Royal Bank of Canada and Toronto-Dominion Bank – will allow Corus to carry significantly more debt relative to its income.
Under its original agreement, Corus would have seen its ratio of debt to earnings before interest depreciation and amortization (EBITDA) drop to a maximum of 4.25 as of Sept. 1, meaning total debt could not exceed 4.25 times its annual operating income, which the company has previously acknowledged it was on course to exceed. That ratio was increased to 4.75 through mid-October. The latest amended deal announced on Friday allows Corus to carry up to $5.75 in debt for every dollar of operating earnings through the end of 2024.
From Jan. 1, 2025, through the end of March, Corus will be allowed to carry as much as $7.25 in debt for every dollar in annual operating income.
Asked repeatedly on a Friday morning conference call with analysts what the company intends to do over the next five months to address its debt issues, co-chief executive officer and chief financial officer John Gossling had no substantive response.
“At this point I think it is a bit unknown just in terms of what will happen between now and the end of March,” Mr. Gossling said. “If the revenue continues on the path that it is on it is going to be very difficult. Again, it is hard to say exactly where this all goes, but the current shape of the balance sheet is likely not going to be sustainable.”
Revenue in the company’s fourth quarter of fiscal 2024, which ended Aug. 31, declined by more than 20 per cent from the same period in 2023 to $269-million. Over all, the company reported a net loss of $781-million for the year, nearly doubling the $408-million loss Corus reported in 2023.
However, the company reported a narrower loss on an adjusted earnings-per-share basis than analysts were expecting, losing 2 cents per share versus an expected 7 cents, as months of aggressive cost cutting efforts started to show results.
Corus has cut more than 800 jobs, roughly 25 per cent of its work force, since the start of 2024 and in July, it warned that its debt issues “may cast significant doubt about the company’s ability to continue as a going concern.”
The company has more than $1-billion in debt due for repayment between now and 2030, with more than $300-million in bank loans due by the end of 2026. Corus also has $500-million in bonds set to reach maturity in 2028 and another $250-million in bonds set to reach maturity in 2030.
Last month, The Globe and Mail reported that Quebecor Inc. had made an offer to acquire Corus, but that the proposal was contingent on Corus’s lenders being willing to write off at least 60 per cent of the company’s debt.
Mr. Gossling and co-CEO Troy Reeb declined to comment on any potential sale of the business when questioned by analysts on the Friday morning call.
The company’s debt crisis dates back the better part of a decade, to early 2016, when Corus agreed to acquire Shaw Media Inc. for $2.65-billion. That was how the company came to acquire its most lucrative assets – including the Global TV network and more than a dozen specialty cable channels such as Food Network Canada and HGTV Canada – but the deal was funded entirely with borrowed money.
Corus raised $2.3-billion in senior secured credit and a $300-million revolving credit facility at the time, which put its lenders first in line for repayment ahead of shareholders.
In June, the company was informed that Warner Bros. Discovery Inc. would not renew Corus’s Canadian rights to five popular specialty channels, including HGTV and Food Network, when its current deal expires at the end of this year. Corus will retain the Canadian content featured on both of those channels, with plans to rebrand them as Flavour Network and Home Network as of Dec. 30.