Ch.15 Can Canwest pull through?

http://www.cbc.ca/money/story/2009/02/27/canwest-deadline.html

Summary:
On Friday, February 27, Canwest Global Communications Corp. had their debt repayment date pushed back by 12 days, but the company has reduced the media company's credit by two thirds, from $300 million to $112 million. Although Canwest has $92 million drawn under the credit line, it said that they had enough cash on hand and cash flow to continue work normally through the period. But the company and its banker are still negotiating on pushing the deadline further back. During all of this, the company is taking measures to reduce expenses and think of alternate business plans to keep this company alive. Even the spokesperson had said that it was "business as usual" it is clear that the company is struggling through this time, as The DBRS puts pressure on them by saying that if they failed to pay their debt of $100 million the company would be in default. But this debt was only so great because of their earlier acquisition of the former Southam newspaper chain and Alliance Atlantic entertainment. So to pay off their debts Canwest is struggling to sell several of its non-core assets. It has even put 5 of its E! television station for sale.

Connections:
This shows that have a good credit and liquid assets are good for running a company. Which is perfect for our Ch.15 topic when bankers decide whether they should loan a company or individual money by seeing there credit history and trust. So after this incident banks may not lend money to Canwest again for a long time because they couldn't meet its deadline. Also because they had bought the other companies, they should have seen their common-size comparative income statement to see if that company is profiting enough or losing money before purchasing it, or else it may become a burden to own. But by selling their assets to try and pay off their debt is smart choice because if all they needed was this little bit of time to catch back up then losing some assets is a suitable sacrifice.

Reflection:
Although having ambition is a good thing, in this case a company expanding by purchasing other companies. It is imperative that the company think everything through before acting on it. One of the many questions is, if the company i bought did not make enough profit to cover its worth of buying it, would it be a good choice? Or maybe if the economy were to suddenly go to a change for the worse would i still be able to keep it running? But everything is not always logical, as emotion may have played a factor in the decision making, I think that even it may not have been the best choice. The ability to buy another company is a great way to show how powerful and sufficient a company is. I hope that for the days to come that Canwest can shine after this predicament.