030401

~~~~~((#))011010000f-Media Affairs

~~~~~((#))016010000p-Ratings & Rating Changes

S&P affirms CanWest Media corporate credit rating

NEW YORK: Standard & Poor's Ratings Services today said it assigned its 'B-' rating to CanWest Media Inc proposed US$200 million senior unsecured notes due 2013.

At the same time, the ratings outstanding on Winnipeg, Man.-based CanWest Media, including the 'B+' long-term corporate credit rating, were affirmed. The outlook is stable.

Net proceeds from the proposed offering will be used to refinance a portion of indebtedness at CanWest Media's immediate holding company.

"The transaction positively affects CanWest Media's financial profile by reducing gross interest costs and the annual accretion impact of its holding company notes, which pay interest in the form of additional notes, in part offset by the anticipated increase in cash interest expenses," said Standard & Poor's credit analyst Barbara Komjathy.

"The new notes are rated two notches lower than the long-term corporate credit rating, reflecting potential priority debt, which considers a fully drawn credit facility, relative to the company's goodwill-adjusted asset base that exceeds 30 percent," Ms Komjathy added.

The ratings on CanWest Media reflect its leading Canadian market position and business diversity afforded by its newspaper publishing and television broadcasting assets, which help to mitigate the effect of the advertising-revenue and newsprint-cost cycles, and the favorable regulatory environment that limits foreign competition and ownership.

These factors are offset by the company's high debt levels, driven by past acquisitions, resulting in relatively weak credit measures.

In addition, following the refinancing, Standard & Poor's considers the company's total leverage covenant as somewhat tight for the near term, with future improvements to be driven by EBITDA growth.

CanWest's first-quarter 2003 (November 30) results reflect positive business fundamentals, such as an improving Canadian advertising climate and strong results for international operations, led by Network Ten.

The company's Global Television stations continue to lead ratings in the important Toronto and Vancouver, B.C., markets, and its national news program, Global National, is in second place, surpassing CBC National.

Although overall newspaper ad lineage remains flat and the recruitment category remains soft, advertising is pacing ahead of last year's in certain sectors such as retail, auto, entertainment, and travel.

The company indicated circulation for the National Post newspaper is stabilizing, and it continues to reduce costs at the paper to meet financial targets.

In addition, newsprint pricing remains favorable, despite upward pressures from newsprint manufacturers.

The stable outlook reflects Standard & Poor's expectations that CanWest Media will maintain its strong business profile, particularly its broadcast television audience and newspaper readership and circulation market shares, and will continue to reduce losses at the National Post.

In addition, proceeds from additional asset sales are expected to lower debt levels to offset accretion in holding company indebtedness.

Standard & Poor's expects total debt (including holding company notes) to adjusted EBITDA will improve to 5.5x, and gross adjusted EBITDA interest coverage to close to 2.0x, in the next two years.-Reuters