Hollinger's credit rating downgraded

Hollinger International, publisher of The Daily Telegraph, has seen its credit rating downgraded by Moody's, which also warned about a potential $260m (£165m) tax liability.

The credit rating agency added the company's weak cash flow was due, in part, to "sizeable management fees" of about $22m a year paid to the chairman, Lord Black of Crossharbour, and his fellow directors.

Hollinger's debt already carried a junk rating and its current $610m refinancing deal, which has seen the company take on an additional $100m of debt, saw it downgraded by a further notch to Ba2. Debt now stands at about $560m, which Moody's said was relatively high for a company of its size. The company sold a large chunk of its portfolio with the divestment of its local Canadian titles, leaving it focused on the Telegraph and the Chicago Sun-Times.

Christina Padgett, a vice-president at Moody's, said: "There's no question about the quality of its assets. This is about the amount of debt, the risk to investors."

No one at Hollinger, in London or New York, was available for comment. The company is suing the Sunday Express, saying it was "grossly libelled" by a report on its refinancing. Hollinger recently said its debt "is not excessive" and it has "substantial" cash in hand.