Sun-Times Media Group's Biggest Stockholder Warns it May Not Be Viable

By: Mark Fitzgerald Hollinger Inc., the Toronto-based holding company that controls Chicago Sun-Times parent Sun-Times Media Group (STMG) through a 70% voting stake, warned in a Securities and Exchange Commission (SEC) filing Friday that it may no longer qualify as a "going concern."

Hollinger painted a bleak portrait of its future -- and reported that it continued to hemorrhage money in the third quarter ended Sept. 30.

Hollinger reported a net loss in the quarter of C$50 million, or US$51.3 million, compared to a loss in the 2006 third quarter of C$31.6 million, or $US32.4 million.

The company reported revenues of C$1.6 million, or US$1.64 million in the quarter, down from C$1.75 million, or US$1.8 million.

Conrad Black, who is awaiting sentencing on fraud and obstruction of justice convictions in U.S. federal court next month, used Hollinger Inc. as one of several holding companies to control a newspaper empire that was once among the world's largest. Alleged massive "looting" of the Sun-Times publishing parent by Black and other top executives of Hollinger and the publishing company of the same name ensnared Hollinger Inc. in numerous lawsuits and regulatory actions.

And now Hollinger, in its SEC statement, says it has virtually no business operations, and its cash flow is drying up.

"Currently, the corporation's monthly cash outflows (principally relating to legal and advisory fees) exceed cash inflows (principally related to interest; rents; a final dividend from its investment in CFP; and in 2006, dividends from Sun-Times, which were later suspended in December 2006)," the filing said. CFP refers to its 39% stake in Cayman Free Press Ltd. In September, a wholly-owned Hollinger subsidiary sold the stake.

The value of its stake in STMG has dropped considerably, Hollinger also said, noting that on Sept. 30, 2007, the bid price of a Class A share was $2.17, compared to $7.34 on Sept. 30, 2006.

"As a result, the corporation's ability to meet its future financial obligations is, in the absence of dividend income from Sun-Times, dependent upon the availability of cash flows from its outstanding litigation claims, and managed levels of spending on other fees and expenses," Hollinger said.