On July 7, the media company released its 2016 third quarter results and details of a proposed recapitalization transaction.

By H.G. Watson, Associate Editor

Postmedia has announced a plan that President and CEO Paul Godfrey says will reduce its debt by approximately $307 million.

On July 7, the media company released its 2016 third quarter results and details of a proposed recapitalization, which, according to a memo released to Postmedia staff, would reduce its debt to $341 million and cut cash interest costs by approximately $50 million. The company will also make an offering of new second lien notes.

Postmedia is currently $648 million in debt. About half of that debt is in US dollars, leaving the company vulnerable to fluctuations in the Canadian dollar.

With the proposed restructuring, Postmedia’s second lien, which, according to the Globe and Mail, is currently owned partly by American company GoldenTree Asset Management would be brought down from C$345 million to C$116 million, and the interest charged on it would be 10.25 percent. Holders of the existing C$345 million will now receive a pro rata share in equity in Postmedia. On a conference call with investors on July 7, Godfrey said GoldenTree is not involved with the new second lien.

The amount of time that Postmedia has to pay back the debt has also been extended, to 2021 and 2023 for the first lien and second lien, respectively.

While the debt reduction is good news, revenue in the quarter were down 12.9 percent, with drops in the double percentage digits for run-of-press revenue. The company had a net loss of $23.7 million in the third quarter.

Godfrey said that this is a “new chapter for Postmedia” and that the company can now focus on improving its revenue streams. He expects the transaction to be concluded by the end of September 2016.

Postmedia plans to reduce operating costs by $80 million by the end of fiscal 2017. According to a slideshow presentation released with the results, Postmedia has reached 80 percent of its targeted savings, or approximately $64 million. “These cost reductions are expected to come from a combination of acquisition synergies and further reorganization of the Company’s operations,” stated a press release published with the third quarter results.

Earlier this year, after Postmedia’s first quarter results were released in January 2016, Godfrey announced plans to consolidate newsrooms in Vancouver, Calgary, Edmonton and Ottawa, and cut 90 jobs.

While Godfrey said that they are looking into selling real estate assets, they are not considering other asset sales. Any further investment in the company would likely be focused on Postmedia’s digital initiatives.

H.G. Watson can be reached at hgwatson@j-source.ca or on Twitter.

H.G. Watson was J-Source's managing editor from 2015 to 2018. She is a journalist based in Toronto. You can learn more about her at hgwatson.com.