Paul Godfrey announces " a proposed recapitalization transaction that will significantly improve Postmedia’s capital structure."

The following memo was sent to Postmedia staff on July 7, 2016, by CEO and President Paul Godfrey.

Today we announced our Company’s financial results for the second quarter of our 2016 fiscal year – March 2016 to May 2016.

The big news today is that we announced a proposed recapitalization transaction that will significantly improve Postmedia’s capital structure and the long-term outlook for our company. The Board of Directors, the Special Committee and Postmedia senior management evaluated a wide range of strategic alternatives and have concluded that the recapitalization transaction announced today is the best available option to improve the company’s capital structure and maximize value for Postmedia and our stakeholders.

Highlights of the Recapitalization Transaction

  • Postmedia’s total debt will be reduced by approximately Cdn$307 million.
  • Annual cash interest expense will be reduced by approximately Cdn$50 million.
  • The maturity date on the First Lien Notes will be extended by approximately four years to July 2021 and the maturity date on the New Second Lien Notes will be July 2023, providing us with additional stability and mitigating the risk associated with the upcoming maturities on the existing First Lien Notes and Second Lien Notes.
  • An offering of New Second Lien Notes will provide us with additional liquidity.

What happens next?

The transaction will be implemented according to a corporate plan of arrangement under the Canada Business Corporations Act (CBCA).

A CBCA plan of arrangement is not an insolvency proceeding. It’s a plan used to restructure a company’s securities, including its debt obligations. There is no trustee or court officer appointed and Postmedia remains in control of its operations at all times.

It will be business as usual as we work to implement the Recapitalization Transaction. Obligations to Postmedia’s employees, customers, suppliers and other trade creditors will be unaffected by the Recapitalization Transaction.

In the next few weeks, we will commence CBCA proceedings and seek an interim order for the calling of a meeting of stakeholders to vote on the Plan of Arrangement.

In late August, there will be meetings to consider and vote on the Plan of Arrangement. Today, we already have the support of more than 80% of the First Lien Noteholders and Second Lien Noteholders for the recapitalization transaction. We also have the support of approximately 75% of our shareholders.

After the meeting, we will seek a final order of the Court approving the Plan of Arrangement.

By the end of September, 2016, we intend to implement the recapitalization transaction (subject to regulatory approvals under the Competition Act and the Investment Canada Act and the waiver of any appeal periods on the final order).

This is positive for Postmedia, our customers, our suppliers and you, our employees. We expect it to make our company financially stronger, more competitive and provide more runway for us to accelerate our business strategy and develop new revenue streams.

On behalf of our Board of Directors and senior management team we appreciate your hard work and dedication under tremendous pressure and uncertainty. It will take everyone across the company working toward the same objectives for us to best leverage this new foundation. I urge you to keep the lines of communication open – within your teams and across our operations and functions – so that we can build on today’s good news and deliver operational results that continue to move our company forward.