A little under a year ago, Lord Black of Crossharbour, the press baron who controls the Daily Telegraph, its Sunday sister and the Spectator magazine, addressed investors through the pages of his annual company report: "This is the last time we will have to inflict upon our persevering shareholders financial results that are apparently absurdly unsatisfactory."
The British establishment wannabe, who renounced his Canadian citizenship in order to take up a Tory peerage, was referring to the mounting losses run up by Hollinger, the complex group of companies through which he controls his interests, which also include the Chicago Sun-Times and the Jerusalem Post.
One year on, it is going to be very hard for Black to keep that promise. The losses have been cut and so have debts, but the price is still being paid for an absurdly ambitious expansion programme during the 1990s. Assets, such as the bulk of Black's Canadian newspapers, have been sold to reduce the pressure, but the shrunken business is still struggling to cover the liabilities that remain. The unsatisfactory financials have simply got more unsatisfactory, evidenced by the fact that shares in Black's core firm, Toronto-based Hollinger Inc, have sunk by 70% since he last addressed shareholders.
This week - horror of horrors - the Standard & Poor's credit rating agency, one of two main arbiters of corporate creditworthiness in the international capital markets, warned that Hollinger was getting close to the point at which it might default on its debt. The scene was set for a messy and painful unwinding of Black's publishing empire as creditors scrambled to get their get hands on assets.
Yet Dan Colson, Hollinger's vice-chairman and Black's right-hand man, seemed to have decided yesterday that the best course of defence was attack: the S&P downgrade, which slashed Hollinger's overall corporate rating to indisputable "junk" status, was "irrelevant."
"With all due respect to Standard & Poor's, the analyst hasn't done her homework. It's nonsense," Mr Colson declared, while rejecting suggestions that Hollinger might be in financial difficulty. Lord Black's personal investment vehicle, Ravelston, may be having to make regular payments to Hollinger to help it service its debts, but according to Mr Colson the real problem is that investors and analysts had failed to understand the empire's complex corporate structure.
"It's complete nonsense to suggest Conrad is having to dig into his personal pocket to keep Hollinger afloat," he insisted. "There is nothing sinister or terrible happening here."
Fears about the financial health of Lord Black's empire - a regular employer of the great and the good, such as Richard Perle, the US defence adviser, and former secretary of state Henry Kissinger - multiplied last Friday when Hollinger Inc admitted in a filing to the American regulator, the securities and exchange commission, that it had a "shortfall between the dividends and fees received from its subsidiaries and its obligations to pay its operating costs".
On Tuesday S&P slashed its long-term rating on Hollinger Inc from BB- to CCC+. The action followed Hollinger's recent announcement that it is uncertain about meeting its future financial obligations on its outstanding preference shares. John Tysall of S&P yesterday said the agency had been contacted by Hollinger Inc but stood by its analysis.
Mr Colson said "confusion" had arisen in the market over the payments being made by Ravelston to Hollinger Inc, which is not especially surprising when Black's company accounts routinely contain a flurry of criss-crossing transactions between his private and publicly listed interests. Big investment institutions, such as pension funds, hate such dealings, with their obvious potential conflicts of interest.
But the focus of S&P's alarming credit assessment was a small class of preference shares issued by Hollinger Inc, the owners of which can demand repayment at any time and which need to be redeemed by next April in any case. Hollinger is trying to negotiate a deal whereby the shareholders are paid 8% interest - rather than the current 7% - in return for putting off the repayment of the $101m due until April 2008.
Mr Colson said: "If on a particular day everyone stood up and said they want their money we could have a short term problem as we scrambled for cash, but this is completely hypothetical. We're confident the new deal will be accepted."
He added that the tone of many of the legal warnings in Hollinger's recent filings with regulators had been unavoidably alarmist. "In the post-Enron world you have to build in all these health warnings and risk factors which in many cases are ludicrous, but that is just the way the world is."
Other analysts took issue with this yesterday, with one pointing to a recent statement from Hollinger: "The company has borrowed funds from the Ravelston Corporation, the parent company, to partially fund its operating costs including interest and preference share dividend obligations. The company will require the continuing financial support from Ravelston, or must sell shares of Hollinger International (the main newspaper business) or sell other investments, in order to be able to continue as a going concern."
This was not "normal" or a piece of overly cautious disclosure brought on by the governance panic which gripped everyone last year, he said. This was just a company struggling to service its debts.
There is a growing body of opinion which says that Black will be forced to sell more assets to heal its balance sheet. It is assumed he would fight to retain his flagship newspaper titles, but all other interest could be declared "non-core".
Mr Colson takes a different tack: Ravelston, which owns 82% of Hollinger Inc, could take the holding company private, he said. "It's an option available to us, one we have considered in the past and one we will probably consider again. Is there any point in being a public company? Probably less than there used to be."
He insists it is "business as usual" at the group and that its lenders were supportive, pointing out that the last time Hollinger raised money the bond issue was "wildly oversubscribed". Indeed, no one has criticised the underlying businesses, such as the Telegraph, which have responded to the advertising recession by cutting costs and working hard to protect income from subscribers.
What the Hollinger group really needs is sustained economic recovery. After last year's annual meeting of shareholders Lord Black told reporters that the com pany's problems were almost behind it. "We will finish tidying up our house over the next year and we will be able to rebuild the company from a strong base," he said. "Some people are going to be caught in a vulnerable position and there will be some opportunities. The theory that I myself am about to lead a life of leisure interrupted only occasionally to harangue their lordships' house about what I think or whatever is on my chest at the moment - that won't happen. Maybe, but not at least for 25 years."
Yours for...?
Possible disposals
West Ferry printers: 50% stake in a joint venture with the Express Newspaper Group. In a protracted legal battle two years ago, the Express demanded £80m for its stake.
Trafford Park printers: 50% stake in a joint venture with Guardian Media Group, publisher of the Guardian. The shareholding is valued at £12m to £25m.
Hollinger Canadian Publishing Holdings: Over 20 newspapers, including the Elk Point Review and Red Deer Express.
Hollinger Canadian Newspapers: 18 newspapers, including the Northern Daily News and Elk Valley Miner.