Debt-laden Latino news network CBS TeleNoticias, 30 percent
owned by CBS Corp., is seeking new investors and will further cut costs to resolve its
financial woes, according to president Manuel Abud.
TeleNoticias late last month filed for Chapter 11
bankruptcy protection in the U.S. after failing to meet its on-going debt obligations.
The five-year-old network is 70 percent owned by Mexican
media company Grupo Medcom. It bought control of the programmer from CBS less than a year
ago as part of its ambition to become a panregional media player.
Even prior to Medcom's takeover, TeleNoticias was known to
be struggling financially, particularly with controlling high news-production costs. Abud
said the company has made substantial progress in slashing operating expenses.
When Medcom bought its stake last November, these costs
amounted to $36 million a year; prior to the bankruptcy filing they had dropped to below
$30 million, while today they stand at between $17 million and $18 million, he said.
Some of the cost savings have come from recent staff
layoffs. Last month, according to published reports, the troubled Miami-based network was
late in issuing paychecks to some of its staff, 77 of which have left the company, leaving
behind a workforce of 203.
Abud said the bankruptcy filing aimed to protect the
company from its creditors while it retools. The restructuring plan was "about
[creating] a slimmer company with a better focus on the size and potential of its
market," he added. That involves expanding distribution in the U.S., as well as
finding a strategic partner for its Portuguese-language feed in Brazil, where some sort of
spinoff is under consideration.
A partner is also being sought for TeleNoticias'
Spanish-language service. On that front, Abud confirmed that the company is in talks with
Mexican media giant Grupo Televisa S.A., which also owns 24-hour Spanish-language pay TV
news network Eco. That network has yet to reach operating breakeven after almost a decade
of operations.
Abud would not say why partnership talks with Televisa,
believed to have started eight months ago, have not produced results. But one TeleNoticias
source said the sticking point was over a potential conflict of interest related to each
party's existing businesses.
Televisa has an exclusive programming agreement with U.S.
Spanish-language broadcaster Univision Communications Inc., in which it owns a small
stake. This raises a potential problem because TeleNoticias provides content to Univision
rival Telemundo. According to industry sources, Televisa has balked at any partnership
with TeleNoticias. While Televisa is interested in cost sharing that would result from an
Eco-TeleNoticias merger, it isn't prepared to assume the network's debt.
TeleNoticias can continue to operate despite the bankruptcy
filing. However, the courts are now involved in decision-making, said Lisa Shasteen, vice
president and general counsel with Tampa, Fla.-based brokerage firm Communications Equity
Associates Inc.
Shasteen explained that the Chapter 11 filing, "could
impinge the ability [of TeleNoticias] to operate. The court will have to approve contracts
and the working out of disputes [with creditors]. That could impair their [restructuring]
progress."
