Hollinger Inc. Losses Mount in Q3

By: (AP) Hollinger Inc., the Canadian holding company controlled by press baron Conrad Black, reported a wider loss in its third quarter and said it could face a cash crunch in the coming months.

In a quarterly report filed with Canadian regulators late Monday, the Toronto-based company revealed it lost $12.1 million in the three months ended Sept. 30, compared with a $9.7 million loss in the same period a year earlier.

Hollinger Inc. blamed a stronger Canadian dollar for a 9% decline in revenues, as revenues from its main U.S. and British operations were affected by the falling U.S. dollar and British pound. Revenues fell to $278 million from $306 million.

The company's outlook has grown bleaker since the quarter ended because its main operating subsidiary, Chicago-based newspaper publisher Hollinger International Inc., plans to cut management fees that the parent company depends upon.

Hollinger International is facing pressure from shareholders and regulatory scrutiny over millions of dollars in unauthorized payments made to Hollinger Inc. and to Black and other executives. The Securities and Exchange Commission has subpoenaed documents from Hollinger International and its board members as well as Hollinger Inc.

Hollinger Inc. said it will need between $20 million and $22 million in support payments in the 12 months ending Sept. 30, 2004, from a private company controlled by Black called Ravelston Management Inc. to fund an expected deficit in cash flow, the company said in a filing with the Ontario Securities Commission.

But Ravelston's ability to make those payments is in doubt since Hollinger International, under pressure from some of its U.S. institutional shareholders, plans to reduce management fees and then terminate its agreement with Ravelston, the company said.

"The reduction in fees during the period January 1, 2004 to June 1, 2004 and the termination by (Hollinger) International of the services agreement effective June 1, 2004 adversely impacts the ability of RMI to make its required support payment to the company which, in turn, adversely impacts the company's liquidity position," Hollinger said.

The Canadian company has a number of major payments coming due in early 2004.

Hollinger International has also demanded the repayment of $32.2 million in payments made to Black, several other key executives and Hollinger Inc.

Hollinger Inc. said in its report that it will hire independent counsel to look into whether Hollinger Inc. is liable to pay back Hollinger International about $16 million in unauthorized payments.

"In the event that the company is required to repay all or a portion of these payments, this could have a material adverse impact on the company's liquidity, and depending on how any such repayments are structured could result in an event of default on the company's senior secured notes," the report said.

Black, who once controlled Canada's largest chain of newspapers and who founded the National Post, has agreed to repay about $7 million he received and has stepped down as chief executive of Hollinger International.

However, he remains CEO of Hollinger Inc., chairman of Hollinger International and retains numerous other influential positions within the interrelated group of private and public companies that control The Daily Telegraph in London, the Chicago Sun-Times and The Jerusalem Post.

Black has said the payments -- meant to ensure he and others didn't compete with companies that bought some of Hollinger International's smaller U.S. papers -- were commercially justified.

Critics argue the non-compete payments should have gone to Hollinger International for the benefit of all shareholders, not just Black and his affiliates.

Depending on how the repayments are structured, Hollinger Inc. might have to default on $120 million in secured notes, the company said.