S&P Downgrades Hollinger’s Credit Rating by Four Notches

17 April 2003

Following an admission by Hollinger Incorporated chairman Lord Conrad Black that his international newspaper fiefdom has a “shortfall between the dividends and fees received from its subsidiaries and its obligations to pay its operating costs”, credit ratings agency Standard & Poors moved immediately to slash Hollinger’s long-term debt status by four notches.

The downgrading from BB minus to CCC+ indicates “serious worry”, a S&P spokesperson told WAMN.

Hollinger Inc, Black’s main holding company is registered in Canada. It owns 72.6% of the voting shares in Hollinger International, the subsidiary which accommodates the Conservative-appointed Lord’s publishing assets, among them Britain's Telegraph Newspapers and The Spectator magazine, the Chicago Sun-Times and the Jerusalem Post.

The group’s damaging revelation was made last Friday in a mandatory filing to US financial regulator, the Securities and Exchange Commission.

Most of Black’s individual assets, including the above titles, have been pledged to lenders [WAMN: 04-Apr-03], and there is growing concern among analysts that the sheer complexity of the commercial web spun by the peer will lead to panic among creditors who fear the gossamer is about to unravel.

Said S&P credit analyst in Toronto, Barbara Komjathy: “The ratings actions follow Hollinger Inc’s recent announcement that there is uncertainty regarding its ability to meet its future financial obligations with respect to its outstanding preferred shares.”

But Hollinger vice-chairman Dan Colson, reportedly a bosom buddy of Black, refuted speculation that the group is in deep water.

“There is absolutely no liquidity crisis whatsoever,” he insisted. “The Telegraph is not for sale and the Chicago Sun-Times is not for sale. None of our major assets is for sale, nor do they have to be. Unfortunately this stuff rattles around the hallways and the guys who get most upset are the people who work for us.”

Despite this robust denial, the globe’s other major ratings agency, Moody’s Investor Services, followed S&P's move and downgraded Hollinger by a similar margin.

Data sourced from: MediaGuardian.co.uk and Times Online (UK); additional content by WARC staff