TORONTO -- Struggling media conglomerate Postmedia announced a proposal Thursday that will slash its $648-million debt by nearly half and give its lenders shares in the company in exchange.
The company says if approved the deal will reduce its debt by $307 million and save it roughly $50 million a year in interest.
Under the plan, Postmedia's second lien debt holders will exchange what they are owed -- roughly $345 million -- for a 98 per cent take in the company, leaving current shareholders with just two per cent.
The company will also issue new second lien notes worth about $110 million. The second lien notes rank behind the first lien notes for any collateral, like Postmedia's assets and property, if the company goes bankrupt.
The publisher of the National Post and other newspapers will also repay $78 million of its first lien debt and be granted a four-year extension that will give the company until July 2021 to repay the remaining $225 million.
Without the proposal, it would have to pay $303 million in August 2017.
The proposal is subject to the approval of shareholders and debt holders, but Postmedia said it has the support of about 80 per cent of its first- and second-lien debt holders and about 75 per cent of shareholders.
Postmedia (TSX:PNC.A) (TSX:PNC.B) expects the transaction will be finished by September.
The restructuring deal came Thursday as Postmedia reported another quarterly loss. The company said it lost $23.7 million or eight cents per diluted share during the third quarter of its 2016 fiscal year compared with a loss of $140.8 million or 84 cents per diluted share during the same quarter the previous year.
Its revenue for the quarter ended May 31 totalled $218.3 million, up from $205.1 million a year ago, boosted by the company's acquisition of Sun Media's English-language newspapers and digital properties last Spring.
Excluding the Sun deal, revenue was down 12.9 per cent.
Many media companies have struggled with declining advertising revenues.
Postmedia has attempted to come up with new ventures to boost revenue, like striking deals with two fintech companies for revenue in exchange for ad space. It's made such deals with Agility Forex Ltd. and Mogo Finance Technology Inc.
It's also embarked on significant cost-cutting measures. In April, it said it would reduce costs by $80 million by the middle of next year. Earlier this year, Postmedia cut approximately 90 jobs and merged newsrooms in four cities.
