Lord Black puts up £9m a year to cover cash shortfall at Hollinger

Hollinger, the international publishing group that owns the Daily and Sunday Telegraph as well as the Jerusalem Post and Chicago Sun-Times, has admitted to US regulators that it was suffering a cash shortfall after two years in which it has lost a total of $574m (£365m).

It reported to the Securities and Exchange Commission on Friday that it had a "shortfall between the dividends and fees received from its subsidiaries and its obligations to pay its operating costs." Ravelston, the private investment vehicle of Lord Black, Hollinger's chairman and chief executive officer, has consequently agreed to pay Hollinger $14m (£9m) a year to cover the shortfall. But plans to redeem $70m of preference shares have had to be abandoned.

On 2 April, when he announced Hollinger's $239m loss for 2002, Lord Black said: "Although a turnaround is expected in advertising revenues for the industry, the timing is uncertain and it is too soon to have confidence in any recent encouraging news on that front. Accordingly, we continue to rely on our cost reduction initiatives as a significant source of improved operating results. Rising operating profits in a declining advertising economy indicate the very high quality of our market leading assets. We expect operating income to continue to improve as the impact of a September price increase at the Telegraph manifests itself and as the full year impact of aggressive cost reduction measures take hold."

In the absence of major disruption of the group's Middle East activities, and assuming no significant newsprint price increases, Lord Black expects 2003 operating income to be in the range of $65m to $75m, which would translate into earnings before interest, tax, depreciation and amortisation of approximately $120m to $130m. This would amount to a considerable turnaround from last year's losses.