Wall Street investment bank Goldman Sachs has asked an appeals court to kill the sale of CanWest Global Communications' television assets to cable operator Shaw Communications Inc.
Goldman plans to file documents Wednesday that criticize the sale of CanWest's TV properties to Shaw and the Superior Court of Ontario's role in the final approval of that deal. The transaction is part of a bankruptcy court-led restructuring of the Winnipeg media company under the federal Companies' Creditors Arrangement Act, or CCAA.
Goldman, an iconic Wall Street firm that is a financial partner of CanWest, called the TV sale process corrupt, and asked the Ontario Court of Appeal to reconsider other purchase proposals, including one backed by Goldman,that were "wrongly" rejected by the bankruptcy court.
Winnipeg-based CanWest, which owes billions of dollars to its creditors, has been operating under court supervision since last year. More recently, it put its chain of big-city newspapers up for sale in a separate but related court-supervised process.
The Goldman appeals move aims to slam the brakes on an agreement between CanWest and Shaw that was approved by the lower court last month, despite an eleventh-hour bid from private equity firm Catalyst Capital Group, which Goldman had supported.
In the documents obtained by The Canadian Press, Goldman alleges that CanWest's directors and the bankruptcy court have both bowed to the interests of CanWest's bondholders, rather than the "best restructuring" plan for the insolvent company.
Goldman claims that the restructuring "has involved a remarkable abuse of the CCAA's process and a total failure of CanWest's corporate governance for the purpose of extracting the most value possible for the noteholders, rather than an effort to produce the most viable restructuring consistent with applicable CCAA protocols and the interests of other constituencies."
The documents allege that CanWest's noteholders have "held a hammer over CanWest's directors" and dictated "every move" during the restructuring process, essentially shutting Goldman out of the process, even though it is a partner on CanWest's specialty channel assets, which include Showcase and History Television.
Goldman helped CanWest finance the acquisition of the channels as part of a takeover of Alliance Atlantis for $2.3-billion in 2007.
"These CCAA proceedings have simply continued the pattern and theme of the noteholders manipulation and the CanWest directors' abdication of their fiduciary duties in favour of the noteholders' dictates. Unfortunately, the CCAA court has not stopped these abuses...," the court filings allege.
Goldman is asking the appeals court to reconsider the approval of Shaw's offer, which is worth $95-million for about 20 per cent of CanWest Media, which holds the broadcast television and specialty channel assets. The deal would also give Shaw 80 per cent of the voting shares.
Catalyst and Goldman's counter offer was valued at $120-million for 32 per cent of the equity interest in CanWest and voting control of the company, though it was shut down when the court approved the Shaw offer.
However, Shaw's agreement also hinges on reaching a separate arrangement with Goldman which still has a stake in CanWest's specialty channels.
"It is critical that the Court of Appeal intervene at this stage of the restructuring process to stop the abusive use of the CCAA to serve the noteholders' interests, to re-empower CanWest's board of directors to perform its fiduciary duty," Goldman said in the filing.
"Without Court of Appeal intervention, this matter will continue down a path of acrimonious and time-consuming litigation in which (Goldman) will ultimately prevail against any attempted disclaimer of the CW Shareholders Agreement."