Canadian media companies hit by economic slowdown

OTTAWA (Reuters) - The economic slowdown has squeezed advertising spending and hurt quarterly financial results for Canadian media companies, triggering warnings of weaker results and credit problems.

Canwest Global Communications (CGS.TO), which owns daily newspapers in every large urban market in Canada, said on Wednesday it may fall short of certain financial covenants in its credit facilities if negative economic conditions persist.

Shares fell sharply in early trade on the Toronto Stock Exchange, plunging 35 percent to 52 Canadian cents. The stock has lost about 90 percent of its value in the last 12 months.

Also on Wednesday, media and entertainment company Corus Entertainment (CJRb.TO) lowered its forecasts for its fiscal year 2009 due to a slowdown in advertising revenue, even as it reported higher quarterly profit.

Corus, which owns television and radio assets as well as the Nelvana animation house, said it now expects to earn C$255 million (140.7 million pounds) to C$265 million in 2009, down from a previous estimate of C$270 million to C$280 million.

Corus's fiscal first-quarter profit rose to C$40.6 million from C$39.4 million a year earlier.

Canwest, which owns daily newspapers throughout Canada along with the country's Global television network and TV operations in Australia through Network Ten, said it would consider selling assets and cutting costs to reduce debt and improve profit.

The company, along with an affiliate of U.S. investment bank Goldman Sachs (GS.N), bought Canadian specialty-TV company Alliance Atlantis for C$2.3 billion in 2007.

Based on current revenue and expense projections, Canwest said that it may be unable to comply with quarterly financial leverage ratio covenants in 2009. The company said it will work to improve profit and reduce debt so that it can comply.