Judge averts closure of Conrad Black's Canadian newspaper

Canadia’s conservative National Post newspaper has been saved from closure after a judge agreed to move it to the solvent publishing division of the collapsed CanWest Media company.

The money-losing Post, which was founded in 1998 by now jailed businessman Conrad Black, would have been forced to close if the change hadn’t been approved because CanWest creditors were not prepared to keep funding it.

However, CanWest’s newspapers, which include the Montréal Gazette, Ottawa Citizen and Vancouver Sun, are held as a separate partnership and is not part of the bankruptcy protection.

Ontario Superior Court Judge Sarah Pepall approved the order in Toronto.

“There’s just no money to continue operating beyond today,” National Post lawyer Lyndon Barnes told the judge. Moving the Post to the newspaper division is a “monumental step forward” in the restructuring plan, he said.

The Post had losses totalling $C62.4 million in the past four years before interest, taxes, depreciation and amortization, Canwest chief financial officer John Maguire said in a statement filed with the court. The newspaper owes $C139.1 million to Canwest Media, which owns Canwest’s television and internet assets.

Judge Pepall questioned whether the move complied with changes in Canada’s bankruptcy law, implemented last month, that prohibit the sale by a debtor company of assets, “outside the ordinary course of business,” unless approved by a judge.

The changes also prohibit the sale of assets to a related company, unless the judge was convinced all other efforts failed.

David Byers, a lawyer for FTI Consulting, the court-appointed monitor overseeing Canwest’s restructuring, said moving the assets was the only option because no one was interested in buying the newspaper.

Financial Post, the newspaper’s business section, quoted Paul Godfrey, president and CEO of the Post, as saying: "The Post has found its logical home, and hopefully these doomsday scenarios we have been hearing for more than a decade will soon disappear. This is another step on the path to profitability."

Newspaper advertising and readership has held up during the Canadian recession, which has been much milder than in the US, where some major newspapers have been forced to cease printing and convert to web-based publishing.