[A-List] Conrad Black: really good news

["Michael Keaney" <michael.keaney@xxxxxx>]

Black's empire pawns assets

Telegraph owner admits that shares in most non-Canadian units have been
pledged to creditors

Dan Milmo
Thursday April 3, 2003
The Guardian

Lord Black's sprawling publishing empire, ranging from the Daily Telegraph
in Britain to the Jerusalem Post and the Chicago Sun-Times, is under
financial pressure and has had to pledge most of its assets to lenders,
according to regulatory filings in Washington.

The Hollinger group, which has long-term debts of $500m (£317m) and has run
up pre-tax losses of $573m over the past two years, reveals in its annual
report that meeting "substantial" debt service obligations is dependent on
cash from US and foreign subsidiaries, provided by dividends and other
payments. Yet the company admits that these businesses face restrictions on
payment of dividends to Hollinger and that the majority of shares in
subsidiaries have been assigned to lenders as collateral.

"Our subsidiaries and affiliated companies are under no obligation to pay
dividends and, in the case of Publishing [a Hollinger subsidiary] and its
principal domestic and foreign subsidiaries, are subject to statutory
restrictions and restrictions in debt agreements that limit their ability to
pay dividends," says a report filed with US regulator the securities and
exchange commission. "Substantially all of the shares of our non-Canadian
subsidiaries have been pledged to lenders of the company."

In a stark admission to shareholders, the report says: "Lord Black is our
controlling shareholder and there may be a conflict between his interests
and your interests."

The Conservative peer, who owns 72.8% of voting shares in the company,
controls Hollinger through the Ravelston Corporation, a vehicle owned by
Lord Black and seven current or former Hollinger executives, including
vice-chairman Dan Colson. Ravelston Management, a subsidiary of Ravelston,
provides consultation and administrative services to Hollinger, charging it
$23.7m in 2002. The report admits that some deals between Hollinger and Lord
Black's other interests may be less favourable than agreements with
independent companies.

According to the document, Hollinger has service agreements with Black-Amiel
Management, a company which links the names of the Hollinger chief executive
and his wife, Daily Telegraph columnist Barbara Amiel. She is a director on
the Hollinger board and vice-president of editorial. During 2002, Hollinger
paid Ravelston executives remuneration of just under $2m.

Details of Lord Black's total pay are not available but the report states
that the peer and three unnamed Ravelston executives received almost $28m
after signing a "non-competition" deal with Canadian publisher CanWest. The
company bought most of Hollinger's Canadian newspapers in 2000 and its 50%
share in Canada's National Post in 2001. Subsequently Ravelston agreed to
provide management services to CanWest for an annual fee of $4m. Ravelston
was paid a total $53m after agreeing not to compete against CanWest for five
years.

Lord Black and three senior executives received $5.1m in a similar agreement
with Canadian media company Osprey, whose chief executive is a shareholder
in Hollinger. Osprey bought a group of Canadian newspapers from Hollinger in
2001 in a $166m deal. The non-competition payments were approved by
Hollinger's independent directors, who include former US secretary of state
Henry Kissinger. The report goes on to state that Ravelston has loaned funds
to Hollinger to help cover its operating costs and dividend payments.

Elsewhere in the report, the Telegraph newspaper group, which includes the
daily and Sunday titles as well as the Spectator magazine, reported a slide
in revenues last year, as both advertising and circulation continued to
drop. Turnover fell from £337m to £321m, advertising revenues, which account
for two-thirds of group income, were down 7.7% to £211m. Circulation revenue
fell 0.9% to £93.6m.