Postmedia Network Canada Corp. is proposing a restructuring plan to reduce its debt by $307-million and annual interest payments by about $50-million as the struggling newspaper company looks to return to firmer financial ground.

The proposed “recapitalization transaction” announced Thursday would wipe out about US$268-million in debt in exchange for granting debt holders 98 per cent of the company’s shares, while reducing and extending the repayment term for remaining debt by four years.

Postmedia expects to complete the plan by the end of September, and said obligations to staff, customers and suppliers of the company won’t be affected by the plan.

“We are tremendously pleased with the outcome of our strategic review and the proposed recapitalization transaction announced today,” said Paul Godfrey, Postmedia’s president and chief executive officer, in a statement. “With the strong show of support from our stakeholders and the hard work and commitment of our management team and board of directors, this will put Postmedia on a stronger footing into the future, and allow us to continue to pursue our business strategy.”

The transaction needs approval from debt holders, shareholders, and potentially regulators, the Ontario courts and the Toronto Stock Exchange. But Postmedia has a support agreement with its largest debt holders and some shareholders.

The plan seeks to chart a more sustainable course for Canada’s largest newspaper publisher, which owns the National Post, several local dailies such as the Vancouver Sun, Calgary Herald, Ottawa Citizen and Montreal Gazette. It also owns digital sites such as Canoe.com and Canada.com.

In April, Postmedia announced it had struck a special committee of independent board members to oversee a review of the business, which was carrying $668-million in debt. The company had just taken a large writedown on its assets, and promised to look at options to improve its “capital structure and liquidity.”

Postmedia’s debt – an albatross that has made an already difficult period for newspapers much harder for the company – is divided in two tranches.

Its first-lien notes were worth $309-million (Canadian) as of Feb. 29, pay 8.25 per cent interest. Canso Investment Counsel Ltd., a fund in Richmond Hill, Ont., holds 82 per cent of these notes. This debt would have comes due in August of 2017 but under the proposed deal, that term would be extended until 2021. The principal amount would be reduced to $225-million through “a cash repayment of approximately [$78-million] at par.”

Second-lien notes, worth $268.8-million (U.S.) pay 12.5 per cent interest and are owned in part by New York-based distressed debt investor GoldenTree Asset Management, which is also Postmedia’s largest shareholder. That debt will be eliminated, with second-lien note holders to be granted a combined 98 per cent of the company’s common equity.

As early as March, GoldenTree had been shopping its stake in Postmedia. In early April, Ted S. Lodge, a partner in the fund, resigned his seat on Postmedia’s board to avoid the appearance of a conflict while Canaccord Genuity Group Inc. tried unsuccessfully to find a buyer for the shares and debt.

Postmedia will also raise $110-million in new cash through by offering new second-lien notes, available first to existing second-lien debt holders on a proportional basis.

BMO Nesbitt Burns Inc. provided a fairness opinion in favour of the proposal, which also has support from Postmedia’s board.

“After a thorough review process, consultation with our advisors and careful consideration of all of our options, the Special Committee has recommended, and the Board of Directors has unanimously approved, the proposed Recapitalization Transaction,” said Rod Phillips, chair of Postmedia’s board, who also led the special committee reviewing Postmedia’s options.

The company reported its third-quarter earnings on Thursday, posting a $23.7-million net loss for the three months that ended May 31. Postmedia’s annual revenue has been in continuous decline, and its shares opened Wednesday’s session on the Toronto Stock Exchange trading at 1.5 cents.

Until now, the newspaper company has searched for a turnaround with a mixture of deep cost-cutting and new digital initiatives, creating of an in-house content marketing service and striking unconventional deals with two fintech companies to trade advertising space for a share of the companies’ revenue, and the ability to acquire shares.