The Corus logo at Corus Quay in Toronto on June 22, 2018.Tijana Martin/The Canadian Press
Who is better qualified to run one of the country’s largest television and radio networks, Pierre Karl Péladeau or a vulture debt fund?
It’s a question regulators need to answer as restructuring talks at Corus Entertainment Inc. CJR-B-T go into overtime. And here’s the spoiler: Mr. Péladeau, chief executive at Quebecor Inc., QBR-B-T is by far the best potential owner of Global TV and a cross-country collection of 32 specialty channels and 38 radio stations.
Corus is an assortment of familiar media properties burdened by a busted balance sheet. Acquisitions made years ago have left the Toronto-based company owing lenders $1.05-billion.
Corus has been renegotiating covenants on its debt since this summer and is working with lenders on some version of a restructuring, a process led by Royal Bank of Canada and Toronto-Dominion Bank. The latest deadline on negotiations came and went on Tuesday, when Corus said it still had access to lines of credit and plans to update investors on talks with creditors when it releases financial results on Oct. 25.
Mr. Péladeau and his team at Montreal-based Quebecor, the dominant player in Quebec media, have been stalking Corus since January.
Quebecor pushes for debt discount as it seeks to acquire Corus Entertainment
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, owner of the dominant news platform in markets such as British Columbia.
To date, Toronto-based Corus and its lenders have declined to engage with Mr. Péladeau. The prospect of being paid back 40 cents on the dollar, or less, is unacceptable to banks holding $312-million in secured debt and credit funds holding $750-million in unsecured notes.
(The Shaw family, which controls Corus through its ownership of the company’s dual-class shares, has shown zero interest in putting more money into the media business. Unless this changes, which seems highly unlikely, the Calgary-based clan will take a back seat to lenders in any Corus restructuring.)
In coming weeks, the standoff at Corus will likely be resolved in one of two ways: creditors take control of a national media platform through a debt-for-equity swap, or they take a haircut while handing the keys to Quebecor. Any change in control will need the blessing of regulators, including the Canadian Radio-television and Telecommunications Commission.
In a debt-for-equity swap, RBC, TD and the rest of Corus’s secured lenders are going to get the best deal they can for their loans and head for the exit. No bank wants to run a television network. Control of Corus will pass to note-owning distressed-debt funds, which make money by cutting costs and devoting any extra cash to paying down loans, rather than building a business.
For a sense of how distressed-debt funds operate, check out Postmedia Network Canada Corp., which runs a bare-bones string of publications in major cities, and sends every extra dollar to New Jersey-based Chatham Asset Management LLC. The hedge fund acquired its stake in Postmedia in a 2016 restructuring.
If creditors end up controlling Corus, the company’s future will feature layoffs, station closings and asset sales.
Mr. Péladeau, on the other hand, is a proven media operator. While Quebecor’s TV division faces the same challenges in its home province as platforms in the rest of Canada – declining advertising and an audience shift to streaming services – the Montreal-based company is doing a far better job of competing for viewers than rivals such as Corus. On any given night, four out of 10 televisions in Quebec are tuned to Quebecor broadcasts.
Mr. Péladeau has the connections and cash needed to rebuild Corus specialty channels gutted by the loss of programs from U.S. network Warner Bros. Discovery, which switched its alliance to Rogers Communications Inc. back in June.
In telecom circles, Mr. Péladeau will always have his critics. Quebecor has made millions of dollars by buying, then flipping wireless spectrum, effectively gaming a government-run system.
However, the former Parti Québécois leader deserves an Order of Canada appointment for lowering cellphone fees across the country since taking control of Freedom Mobile in 2023 – a disruptive move that helped knock the stuffing out of the stock prices of rival telecoms.
If regulators at the CRTC need to decide between a distressed-debt fund or Quebecor as the next owner at Corus, Mr. Péladeau is the clear choice as the country’s new king of content.
Editor’s note: A previous version of this article incorrectly stated Corus Entertainment breached debt covenants this summer. The company has been renegotiating covenants on its debt since this summer.