In the final analysis, it was always going to end up this way - with Leonard Asper scrounging for a few desperate dollars and learning that on Bay Street, friends and money are hardest to find when you really need them.
CanWest Global, the largest owner of television, newspapers and radio in Canada, has reached the wall. Maybe, somehow, it can stay out of bankruptcy protection. Maybe, somehow, the Asper family can keep a grip on their once-great, but now tattered, company. The former might still be possible, but with each passing week, the latter gets more improbable. As the CEO and the controlling shareholder, Mr. Asper will get the most blame. But he had plenty of help.
Every addict has his enablers; debt addicts do, too. CanWest, staring up at a $4-billion pile of bonds and bank loans, is in a financial bind because it never fixed its balance sheet after the high-priced deal in 2000 for most of Conrad Black's Canadian newspapers. And it never fixed the balance sheet because of an awful combination of poor timing, rotten luck, blundering and bad advice. Among his failings as chief executive officer, Mr. Asper's greatest might be that he put too much faith in investment bankers. Just like a lot of other people, come to think of it, before the bubble burst.
If the beginning of the decline can be traced back to that expensive dive into the newspaper business, Mr. Asper can hardly be faulted for that decision. The deal was his father's, and the son, then 36, was still a green CEO-in-training. Besides, the Aspers were hardly the only ones to go for pricey deals. Quebecor backed an acquisition for Vidéotron. BCE paid $2.3-billion for CTV and billions more for Teleglobe. Each of those deals looked bad a year or two later.
The difference was that those companies set to fixing their debt problems with alacrity as the markets improved. BCE dumped its Yellow Pages (and was roasted for it, but looks smart today). Quebecor did a series of refinancings and lopped $3-billion off its debt load in four years.
CanWest never attacked debt with the same urgency. Instead, it sold minor assets for minor money and tried some too-cute attempts at financial engineering. Mr. Asper dithered on whether to cash in on the income trust mania, then did so in the fall of 2005 just when the feds were considering a new tax on trusts. The deal raised $550-million, but the political uncertainty cost CanWest hundreds of millions more.
But that was nothing compared with the missteps that occurred later. You can draw a direct line, in fact, from the decisions made in the first six months of 2007, the zenith of the credit bubble, to CanWest's financial predicament today.
Buying Alliance Atlantis for $2.3-billion in that complicated deal - renting Goldman Sachs' balance sheet to do it - was not the problem. It made sense for CanWest to get into specialty cable, even if the cost was high. Even before that deal had been approved by the CRTC, though, tremors were starting to emerge from the U.S. economy. CanWest had two obvious options for repaying debt. It could sell its majority stake in Australia's Ten Network or a portion of its Canadian newspapers. Both businesses were already publicly traded. Together, the two would have raised most of the money needed to pay for Alliance.
If CanWest slips into creditor protection - not a certainty, and its banks would like to avoid that - many will point to Mr. Asper's stubbornness in hanging on to Australia. But the decision to repurchase the newspaper trust, just before advertising went off a cliff, was nearly as damaging because it sent $500-million in cash out the door just as the Alliance debt was coming on the books. Who told him that was a good idea?
What you see here is a pattern - not just of making bad deals, but a pattern of thinking, or, if you want to be less charitable, of hubris.
Like the person who has too much pride in his home and holds out for every last dollar when selling, even in the face of evidence that the market is worsening, Mr. Asper could never bring himself to shed a trophy asset. (The one he did sell, he bought back less than two years later for nearly the same price.) He always thought he could manage his way through the problem and avoid crisis.
A cavalcade of senior executives has passed through CanWest, many arriving with big promise and leaving with severance packages in a few years. But what the company really needed was a new chief financial officer - somebody who could water down the investment bankers' dare-to-be-great speech and give the boss, who was a twentysomething lawyer the last time Canada had a recession, a few lessons in the perils of debt. It's a cautionary tale for CEOs everywhere.