Oct. 30 (Bloomberg) -- Canwest Global Communications Corp., the insolvent Canadian media company, won a judge’s approval to move the assets of the National Post to its solvent newspaper division, allowing the national newspaper to keep operating.

The Post, which hasn’t made a profit since its inception in 1998, would have been forced to close if the change hadn’t been approved because creditors wouldn’t let the parent company continue to fund it, Canwest’s lawyer Lyndon Barnes said. Ontario Superior Court Judge Sarah Pepall approved the order today in Toronto.

“There’s just no money to continue operating beyond today,” Barnes told the judge. Moving the Post to the newspaper division is a “monumental step forward” in the restructuring plan, he said.

The Post had losses totaling C$62.4 million ($58.3 million) in the past four years before interest, taxes, depreciation and amortization, Canwest Chief Financial Officer John Maguire said in a statement filed with the court. The newspaper owes C$139.1 million to Canwest Media Inc., the company that holds Canwest’s television and Internet assets, Maguire said. Canwest Media also is in bankruptcy protection.

Reduce Costs

Moving the Post to Canwest Partnership will reduce the costs the newspaper must absorb and which otherwise would be paid by the holding company, Maguire said. A shutdown of the paper would raise costs at the newspaper division, he said.

No one opposed the proposal to move the newspaper assets and it had the support of Canwest Media and Canwest Partnership creditors, Barnes said. The two groups of creditors went through tough negotiations to devise the plan, he said.

“The bondholders have quite a hammer,” Barnes said. “If they could’ve got another penny, they would have.”

Pepall questioned whether the move complies with changes in Canada’s bankruptcy law, implemented last month, that prohibit the sale by a debtor company of assets, “outside the ordinary course of business,” unless approved by a judge.

The changes also prohibit the sale of assets to a related company, unless the judge is convinced all other efforts failed.

David Byers, a lawyer for FTI Consulting Inc., the court- appointed monitor overseeing Canwest’s restructuring, said moving the assets is the only option because no one is interested in buying the newspaper.

Pepall granted the order from the bench and said she would provide her reasons next week.

She also granted Canwest’s request to extend the bankruptcy protection to Jan. 22.

The case is In the matter of a Plan of Compromise or Arrangement of CanWest Global Communications Corp., CV-09-8396- 00CL, Ontario Superior Court of Justice (Toronto).

To contact the reporter on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net.

Last Updated: October 30, 2009 17:32 EDT