Torstar not seeking trust status -- but it leaves the door open

Torstar Corp. has no plans to spin off its newspapers into an income trust and has not hired a financial adviser to explore that option, but it might consider the move if Ottawa doesn't change the tax laws, chief executive officer Robert Prichard said yesterday.

Speaking at a BMO Nesbitt Burns telecommunications and media conference, Mr. Prichard said his company's view of trusts has not changed since rival CanWest Global Communications Corp. announced last week that it is spinning off most of its newspapers and Internet operations into a trust.

While a trust structure is attractive from a tax planning perspective, Mr. Prichard said, a preferable scenario is for Ottawa to reform corporate tax policies so that companies don't feel they have to make the conversion.

Last week, Ottawa asked for input on whether it should change the favourable tax treatment of trusts. "It's sensible for a company like ours to want to see how that comes out," Mr. Prichard said.

So, while Torstar has "no current intention to convert and we haven't hired an investment bank to help us . . . we're not saying never."

He said Torstar has discussed the issue at the board level, but has not talked formally with the voting trust that controls the company on behalf of five shareholding families.

One concern about converting to a trust, Mr. Prichard said, is that such a move could dampen enthusiasm for expansion projects.

Torstar has invested heavily in a community newspaper startup in Ontario's Niagara region, for example, but the venture will take time to be profitable. "The concern has been, would we have the same appetite for [this kind of project] if that could threaten our distribution [payouts from the trust]?"

Still, he said, investors appear to be getting more sophisticated, and now understand that companies with a trust structure will still need to make significant investments.

In a separate conference session, executives from broadcasters Corus Entertainment Inc. and CHUM Ltd. said they have looked at the trust structure, but are not ready to consider a conversion at this time.

Mr. Prichard said it would be "good news" for the Toronto Star, Canada's largest circulation newspaper, if the National Post went out of business.

Rumours of the Post's demise are heating up again, especially after the paper was left out of CanWest's newspaper trust spinoff. Mr. Prichard said he has no idea what strategic plans CanWest has for the paper, but if it closes "net net we'll make more money," even though Torstar prints some of the Post's papers.

Some observers have suggested the Financial Post might survive and become the business section of the Toronto Star. Mr. Prichard played down this possibility, saying "most readers of the Star don't want that big a business section."

Still, he said, the Star could have a relationship with a standalone Financial Post, by promoting it or delivering it for its owners.

Mr. Prichard said Torstar has considered converting some of its broadsheet newspapers, such as the Hamilton Spectator and the Kitchener-Waterloo Record, into smaller "tabloid" or so-called "Berliner" sizes, but has rejected the idea, at least for the time being.

The company might reconsider the move for some of its papers in the future, he said.