Evening Standard: Conrad Black's empire unravels
By David Rowan
FOR a media power couple as socially self-conscious as Conrad Black and Barbara Amiel, life is about to become distinctly uncomfortable. It is not just the possible loss of the two corporate jets, always useful to visit friends like Henry Kissinger or to nip down to their exclusive Palm Beach house, or the drastic financial settlement that will limit Lord Black's annual pay to just £4 million.
Worse than that, after his hugely indebted Hollinger newspaper empire was downgraded to a "junk" rating, investors have just forced him to dilute his shareholding amid a reported cash crisis and accusations that it funds his very expensive lifestyle. Mutterings about Hollinger's troubles are not the sort of press coverage the Blacks have come to expect a month before their annual Kensington garden party.
"He's facing a great deal of trouble," according to one of Black's former senior executives. "Conrad is a clever man, but is far too self-indulgent, and megalomania has set in. He's always regarded Hollinger as a feudal fiefdom - seven or eight years ago he was on the cusp of becoming a major international player, but through his own mistakes it has unravelled. He just hasn't added a measure of self-discipline to his skills as a dealmaker. It's not his instinct to accept t he idea of accountability."
The finance houses that have been backing the group seem to agree. Hollinger International has lost $550 million in the past two years, to add to a huge long-term debt, and Hollinger Inc has a junk "CCC" credit rating. Fund managers allege that Black - who analysts say controls his empire with just $13 million of his own equity invested - is depressing the share price by taking too much out.
Last Thursday, Black - whose group publishes 144 paid-for newspapers including The Daily Telegraph, the Chicago Sun-Times and The Jerusalem Post - faced aggrieved shareholders at the luxurious Metropolitan Club, New York. According to Jan Loeb, an analyst with the US investment bank Jefferies & Company, the company ought no longer to be run as Black's "private fiefdom". "It has two planes, apartments and other expenses for the upkeep on Conrad's lifestyle that come out of shareholders' pockets," Loeb said.
Black agreed to an inquiry into whether he and other executives had benefited excessively. More importantly, Black agreed to sell up to 10 million shares, and to reform the way the company is structured.
Hollinger International, the part of Hollinger Inc which owns the newspapers, has two types of shares - and those held by Black and his executives count for 10 times as many votes as those held by outsiders. He has now agreed to give all shares equal status within five years. But what worries some investors more is the secretive network of companies that Black uses to maintain control.
Black and his executives are claimed to make millions each year through "management fees" channelled through a web of smaller companies. So although Black earned a relatively small salary of $462,000 (£290,000) last year as chairman and chief executive of Hollinger International, he and his senior colleagues are said to have made around $200 million in these management fees since the mid-1990s. Last year, Black received $6.5 million from the Ravelston Corporation, which he uses for his personal investments.
Rival newspapers this week have delighted in pointing out Hollinger's difficulties. But it is nothing new for heavily indebted corporations to ride out short-term financial squeezes, and there is no suggestion that Black and his colleagues; have done anything other than cleverly - and legally - find ways to reward themselves.
Perhaps there is something more at play. The BIacks, after all, are both high-profile networkers, with a string of glamorous homes and unfettered access to millions of readers. Schadenfreude is not far beneath the rivals' jeering headlines. After all, his critics argue that Lord Black of Crossharbour places maintaining his social position high on his list of priorities.
He collects great acquaintances: Hollinger directors include Henry Kissinger and the former US defence secretary Richard Perle. Friends have ranged from Robert Maxwell to Valery Giscard d'Estaing. An ex-colleague says: "He just wants to be seen as a mover and shaker among the US political elite. He lives an incredibly high-maintenance life."
Max Hastings, in his book Editor, writes: "Conrad revelled in wealth and power. 'The deferences and preferments that this culture bestows upon the owners of great newspapers are satisfying,' he once observed."
The banks to which Hollinger is indebted are now considering whether to continue indulging such ambitions. But Dan Colson, Hollinger's vice-chairman, insists that the company's future is secure, and dismisses as "horseshit" speculation that it is ripe for takeover. "There's been a lot of inaccurate reporting because journalists don't do their homework," he says. "They think Hollinger is one company, but there's a Canadian Hollinger and an American one. The nonsense about the socalled 'liquidity problem' was at the Canadian one - which is essentially a holding company, so of course there isn't oodles of cash maintained there."
Colson accepts that there has been "a perceived lack of transparency". "In the last year, for the first time, we've started to comply with new financial disclosure rules. A lot of things have become more clear - but that doesn't mean that they were in any way improper before. We have some very distinguished directors, and we'd be pretty foolhardy to do anything that would embarrass them."
It is "completely untrue" that Black runs the company to fund a high-maintenance lifestyle, Colson insists. "The 'fiefdom' idea is completely inaccurate - it's a result-of people wrongly assuming that any payments made to Ravelston [Black's company] are finding their way into his pockets. In fact, at Ravelston there are 30 to 35 full-time employees who have large overheads to pay for."
It is "complete nonsense" that the Telegraph papers are in trouble. "They made £41 million last year in a difficult market, and there aren't many papers in the UK making any money these days." Nor are there any plans to change editors: Charles Moore has been "doing a splendid job".
Still, there is now a growing crowd baying for sacrifices - if not Lord Black's tenure as a powerful proprietor, then at least for some sign of repentance about his unfettered expenditure. The jets, for certain, look like taking the fall.
"We needed the planes more when we had newspapers. in many more cities, but it's arguable that.we don't need them as much now," Dan Colson says. "We're hardly the only company that has a corporate plane - but we don't need this controversy."
(Evening Standard, May 28 2003)
FOR a media power couple as socially self-conscious as Conrad Black and Barbara Amiel, life is about to become distinctly uncomfortable. It is not just the possible loss of the two corporate jets, always useful to visit friends like Henry Kissinger or to nip down to their exclusive Palm Beach house, or the drastic financial settlement that will limit Lord Black's annual pay to just £4 million.
Worse than that, after his hugely indebted Hollinger newspaper empire was downgraded to a "junk" rating, investors have just forced him to dilute his shareholding amid a reported cash crisis and accusations that it funds his very expensive lifestyle. Mutterings about Hollinger's troubles are not the sort of press coverage the Blacks have come to expect a month before their annual Kensington garden party.
"He's facing a great deal of trouble," according to one of Black's former senior executives. "Conrad is a clever man, but is far too self-indulgent, and megalomania has set in. He's always regarded Hollinger as a feudal fiefdom - seven or eight years ago he was on the cusp of becoming a major international player, but through his own mistakes it has unravelled. He just hasn't added a measure of self-discipline to his skills as a dealmaker. It's not his instinct to accept t he idea of accountability."
The finance houses that have been backing the group seem to agree. Hollinger International has lost $550 million in the past two years, to add to a huge long-term debt, and Hollinger Inc has a junk "CCC" credit rating. Fund managers allege that Black - who analysts say controls his empire with just $13 million of his own equity invested - is depressing the share price by taking too much out.
Last Thursday, Black - whose group publishes 144 paid-for newspapers including The Daily Telegraph, the Chicago Sun-Times and The Jerusalem Post - faced aggrieved shareholders at the luxurious Metropolitan Club, New York. According to Jan Loeb, an analyst with the US investment bank Jefferies & Company, the company ought no longer to be run as Black's "private fiefdom". "It has two planes, apartments and other expenses for the upkeep on Conrad's lifestyle that come out of shareholders' pockets," Loeb said.
Black agreed to an inquiry into whether he and other executives had benefited excessively. More importantly, Black agreed to sell up to 10 million shares, and to reform the way the company is structured.
Hollinger International, the part of Hollinger Inc which owns the newspapers, has two types of shares - and those held by Black and his executives count for 10 times as many votes as those held by outsiders. He has now agreed to give all shares equal status within five years. But what worries some investors more is the secretive network of companies that Black uses to maintain control.
Black and his executives are claimed to make millions each year through "management fees" channelled through a web of smaller companies. So although Black earned a relatively small salary of $462,000 (£290,000) last year as chairman and chief executive of Hollinger International, he and his senior colleagues are said to have made around $200 million in these management fees since the mid-1990s. Last year, Black received $6.5 million from the Ravelston Corporation, which he uses for his personal investments.
Rival newspapers this week have delighted in pointing out Hollinger's difficulties. But it is nothing new for heavily indebted corporations to ride out short-term financial squeezes, and there is no suggestion that Black and his colleagues; have done anything other than cleverly - and legally - find ways to reward themselves.
Perhaps there is something more at play. The BIacks, after all, are both high-profile networkers, with a string of glamorous homes and unfettered access to millions of readers. Schadenfreude is not far beneath the rivals' jeering headlines. After all, his critics argue that Lord Black of Crossharbour places maintaining his social position high on his list of priorities.
He collects great acquaintances: Hollinger directors include Henry Kissinger and the former US defence secretary Richard Perle. Friends have ranged from Robert Maxwell to Valery Giscard d'Estaing. An ex-colleague says: "He just wants to be seen as a mover and shaker among the US political elite. He lives an incredibly high-maintenance life."
Max Hastings, in his book Editor, writes: "Conrad revelled in wealth and power. 'The deferences and preferments that this culture bestows upon the owners of great newspapers are satisfying,' he once observed."
The banks to which Hollinger is indebted are now considering whether to continue indulging such ambitions. But Dan Colson, Hollinger's vice-chairman, insists that the company's future is secure, and dismisses as "horseshit" speculation that it is ripe for takeover. "There's been a lot of inaccurate reporting because journalists don't do their homework," he says. "They think Hollinger is one company, but there's a Canadian Hollinger and an American one. The nonsense about the socalled 'liquidity problem' was at the Canadian one - which is essentially a holding company, so of course there isn't oodles of cash maintained there."
Colson accepts that there has been "a perceived lack of transparency". "In the last year, for the first time, we've started to comply with new financial disclosure rules. A lot of things have become more clear - but that doesn't mean that they were in any way improper before. We have some very distinguished directors, and we'd be pretty foolhardy to do anything that would embarrass them."
It is "completely untrue" that Black runs the company to fund a high-maintenance lifestyle, Colson insists. "The 'fiefdom' idea is completely inaccurate - it's a result-of people wrongly assuming that any payments made to Ravelston [Black's company] are finding their way into his pockets. In fact, at Ravelston there are 30 to 35 full-time employees who have large overheads to pay for."
It is "complete nonsense" that the Telegraph papers are in trouble. "They made £41 million last year in a difficult market, and there aren't many papers in the UK making any money these days." Nor are there any plans to change editors: Charles Moore has been "doing a splendid job".
Still, there is now a growing crowd baying for sacrifices - if not Lord Black's tenure as a powerful proprietor, then at least for some sign of repentance about his unfettered expenditure. The jets, for certain, look like taking the fall.
"We needed the planes more when we had newspapers. in many more cities, but it's arguable that.we don't need them as much now," Dan Colson says. "We're hardly the only company that has a corporate plane - but we don't need this controversy."
(Evening Standard, May 28 2003)
posted by David Rowan at Wednesday, May 28, 2003
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