Embattled newspaper baron Conrad Black all but admitted yesterday he is losing his grip on his empire.
Hollinger Inc., the Toronto holding company where Black wields power over his newspaper holdings, said in a regulatory filing yesterday that it is in danger of defaulting on its debt.
Doing so could cost Black his super-voting stock, which enables him to control the board vote at Hollinger International – which operates the company’s newspapers, including the London Daily Telegraph, the Chicago Sun-Times and the Jerusalem Post.
Hollinger Inc. is facing a cash crunch that could result in the company being unable to pay the interest on some $120 million in bonds.
The company relies on fees from Hollinger International, which get funneled through Ravelston, a private company controlled by Black and his cohorts.
Hollinger Inc. said yesterday it needs at least $14.7 million in 2004 to meet its debt requirements.
But sources said Black will not get anywhere near that amount. Hollinger International plans to reduce those fees starting Jan. 1 to between $2 million and $4 million annually, according to sources familiar with the matter.
If Black’s holding company does not get enough money through Ravelston, it will “be required to dispose of assets or seek financing,” the company said yesterday.
The bonds are backed by Hollinger Inc.’s equity in Hollinger International, and any default could force Black to relinquish his voting stock. Black controls roughly 30 percent of Hollinger International’s equity, but almost 73 percent of the voting stock.
The financial pinch could lead to a proxy fight, which ultimately could mean Black’s banishment from Hollinger International’s board.
Black remains chairman of Hollinger International, although he was deposed as CEO last month after the company found almost $32 million in payments to Black and others that were either unauthorized or improperly disclosed.
Black’s top deputy, David Radler, was also given the boot.
As a result, Black has been forced to give up many of the perks he enjoyed on the company dime – including maid and butler service and the use of corporate jets.
In the filing yesterday, Hollinger Inc. said it is on the hook for $180,000 in monthly lease payments for one of the jets, which has been grounded. Hollinger International has put one of its jets up for sale and is trying to get out of the lease for the other.
In addition, Hollinger Inc. disclosed yesterday that it was forcing Black and Radler to pay back a $5.9 million loan given in 1998 to buy up shares in the company.
Hollinger Inc., Hollinger International and the companies’ auditor, KPMG, have received subpoenas from the SEC.
Observers say the scandal could ultimately lead to criminal charges under the Sarbanes-Oxley Act, which holds company executives responsible for approving false financial statements.
—-
CAN YOU SPARE A DIME?
Hollinger Inc. is in danger of defaulting on its debt, according to a regulatory filing. Details:
* Fees funneled through Black’s Ravelston will be reduced Jan. 1, creating a shortfall
* Lease payments on one jet – now grounded – are $180,000 a month
* Black and top deputy David Radler owe $5.9 million on a company loan