Goldman Sachs in legal battle with Canwest

Bank claims media co. not conveying major changes

By BRENDAN KELLY

MONTREAL -- U.S. investment bank Goldman Sachs has initiated a legal battle with beleaguered Canuck broadcaster Canwest Global Communications over control of Canwest's Canadian cable channels.

Goldman Sachs filed documents in Ontario Superior Court on Monday alleging that the Winnipeg-based media company has been making major changes to its corporate structure without telling the investment banker.

Goldman Sachs is partnered with Canwest in CW Media, which owns 13 cable channels, including Showcase and History Television, and is considered one of the most lucrative Canwest assets. Those channels generated profit of C$129 million ($121 million) for the first nine months of this fiscal year. Goldman Sachs owns 36% of the voting shares in CW Media and 65% of the equity in the company.

Canwest is under court-sanctioned bankruptcy protection, but CW Media is not part of that court protection and remains a separate company.

Goldman Sachs alleges that a numbered company -- a generic corporation known by its assigned corporation number, a practice common in Canada -- set up in 2007 to control those cable channels had been quietly closed by Canwest just before Canwest filed for bankruptcy protection in early October. The allegation is that the move was ordered by the creditors, who now have a huge say on decisions regarding the future of Canwest. Goldman Sachs' fear is that the closing down of the numbered company will allow the creditors to take control of the cable channels as the Canwest assets are sold off. Canwest is desperately trying to come to grips with its $4 billion debt.

Goldman Sachs is petitioning the court to have the numbered company revived and to ensure that CW Media's assets not be included in the bankruptcy proceedings.

The plan is for Canwest's restructuring to be completed by January. Broadcast regulator the Canadian Radio-Television and Telecommunications Commission is also set to review the issue of the closing down of this numbered company.