Lord Conrad Black's Hollinger Inc [H-Inc] may still be on course for a cash crunch after apparently rejecting a multimillion-dollar loan from its media group subsidiary.

A letter seen by the Financial Times suggests that Black's firm turned down the offer of a $7.4 million (€6.0m; £4.0m) loan from newspaper publisher Hollinger International [H-Intl], in which H-Inc has a controlling stake. The cash was to be used to meet an interest payment on debts of $120m, due on March 30 [WAMN: 08-Mar-04].

The letter, from H-Intl ceo Gordon Paris to Peter White, chief operating officer at H-Inc, indicates that the parent group rejected the loan because its bond agreement limits its ability to borrow. Paris then argues that H-Inc's claim is "not true" and insists that the offer "remains a viable option".

H-Inc was left heading for a default on the interest payment when a Delaware court blocked Black's sale of the company to Britain's Barclay brothers [WAMN: 27-Feb-04]. As part of his ruling, Judge Leo Strine ordered H-Intl and H-Inc to agree a loan.

Sources at the parent group claim it is exploring other strategies and will still meet the payment. However, some H-Intl investors fear Black could use a default to get his hands on shares in the company held as collateral by H-Inc's creditors.

Data sourced from: Financial Times; additional content by WARC staff