Who's buying Postmedia?

Who’s going to buy Postmedia Network, Canada’s largest newspaper publisher?

That’s the subject of great speculation now that word has leaked out that Golden Tree Asset Management, the largest shareholder in Postmedia Network Canada, is looking for someone to buy its shares.

Will the buyer be a traditional media company like Torstar, owner of the Toronto Star which bid on Postmedia several years ago, or will it be a new player with deep pockets like Google or Facebook?

Golden Tree, a New York-based hedge fund, controls 52% of Postmedia’s restricted voting shares and is owed a portion of the publisher’s substantial debt of about $670 million. That debt comes due in two installments in 2017 and 2018 but Postmedia is already struggling with debt payments of about $69 million per year and is bleeding money.

Postmedia has pledged to cut $80 million in expenses over the next year but there isn’t a lot of confidence in its ability to emerge as a profitable company. RBC Dominion Securities has set a target of “zero” for the publisher’s share price while a credit rating agency has said its capital structure is “unsustainable.”

While the American hedge fund controls 52% of the restricted voting shares, Canso Investment Counsel Ltd of Richmond Hill is believed to be the largest holder of voting shares. Postmedia’s dual share structure is designed to limit GoldenTree’s voting power so that Postmedia qualifies for the favourable tax treatment awarded Canadian publishers.

Postmedia controls most of the big city daily newspapers in Canada, as well as the National Post. With its acquisition of Sun Media last year, it gobbled up the Toronto Sun and the Sun Media chain of city tabloids and community newspapers, including the London Free Press.