Hollinger Inc.

Hollinger Inc.

March 08, 2005 23:15 ET

Hollinger Inc. Status Update


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: HOLLINGER INC.

TSX SYMBOL: HLG.C
TSX SYMBOL: HLG.PR.B

MARCH 8, 2005 - 23:15 ET

Hollinger Inc. Status Update

TORONTO, ONTARIO--(CCNMatthews - March 8, 2005) - Hollinger Inc.
("Hollinger") (TSX:HLG.C)(TSX:HLG.PR.B) provides the following update in
accordance with the guidelines pursuant to which the June 1, 2004
management and insider cease trade order was issued. These guidelines
contemplate that Hollinger will normally provide bi-weekly updates on
its affairs until such time as it is current with its filing obligations
under applicable Canadian securities laws. Reference should be made to
Status Update Reports and other press releases that have been previously
filed by Hollinger and which are available on SEDAR at www.sedar.com.

Recent Events

On March 4, 2005, Hollinger released financial information in the form
of an unaudited consolidated balance sheet as at September 30, 2004,
together with notes thereto, prepared on an alternative basis, as
described below (the "Alternative Financial Information"). The
Alternative Financial Information was prepared by management of
Hollinger and has not been audited or reviewed by Hollinger's auditors.
The Alternative Financial Information includes the accounts of Hollinger
and those wholly-owned subsidiaries which carry out head office
functions and which do not represent investments. Investments in other
companies and subsidiaries, such as Hollinger International Inc.
("Hollinger International"), are not consolidated but rather are carried
as investments and are accounted for at their market value. The
Alternative Financial Information has been prepared in accordance with
Hollinger's traditional accounting policies with the exception that it
has been prepared as though Hollinger had always accounted for its
assets and liabilities at their market values.

On March 7, 2005, the Board of Directors unanimously determined to call
a special meeting of Hollinger's shareholders in connection with the
proposed share consolidation going private transaction originally
announced on October 28, 2004, on the terms announced on March 7, 2005.
The Board of Directors determined not to make a recommendation as to
whether shareholders should accept or reject either the resolution
effecting a consolidation of the outstanding retractable common shares
of Hollinger or the resolution effecting a consolidation of the
outstanding Series II Preference Shares of Hollinger. The special
meeting of shareholders will be held on March 31, 2005. The transaction
remains subject to the approvals and processes referenced in Hollinger's
October 28, 2004 press release. Formal documentation for the special
meeting, including a management proxy circular, will be mailed to
shareholders of Hollinger in the near future.

As previously disclosed, as a result of the expiry of Hollinger's
directors' and officers' liability insurance, Hollinger placed
C$2,000,000 in trust with the law firm of Aird & Berlis LLP, as trustee,
in support of Hollinger's indemnification obligations to directors
Gordon W. Walker, Q.C., Paul A. Carroll, Q.C., Donald M.J. Vale, Robert
J. Metcalfe and Allan Wakefield and former director Richard Rohmer. On
March 7, 2005, Hollinger agreed to deposit an additional C$6,000,000
into such trust. In addition, Hollinger agreed to establish a similar
trust in support of Hollinger's indemnification obligations to two
financial executives of Hollinger with a deposit of C$500,000.

Financial Statements

Hollinger and Hollinger International continue to pursue, on a without
prejudice basis, the conclusion of mutually acceptable arrangements to
permit the audit of Hollinger's 2003 annual financial statements to
begin as soon as possible.

As previously reported, Hollinger's 2003 annual financial statements
could not be completed and audited until Hollinger International's 2003
annual financial statements were completed. On January 18, 2005,
Hollinger International filed its 2003 Form 10-K with the United States
Securities and Exchange Commission (the "SEC"), which included audited
financial statements and related MD&A for the fiscal year ended December
31, 2003 and restated audited financial results for the fiscal years
ended December 31, 1999, 2000, 2001 and 2002. Hollinger International
stated that the restated financial results were to correct accounting
errors in prior periods and to reflect reclassifications arising from
the adoption of a new audit standard. On January 21, 2005, Hollinger
International filed its audited financial statements (and related MD&A)
and its renewal Annual Information Form for the year ended December 31,
2003 with the Canadian securities regulatory authorities. The foregoing
were necessary but not sufficient conditions to permit Hollinger to
complete and file its 2003 annual financial statements as the completion
and audit of such financial statements will require a level of
co-operation from Hollinger International, which is still in
negotiation, and Hollinger International's auditors.

In its news release of February 17, 2005, Hollinger International
indicated that it expected to be able to file, within approximately two
months following the filing of its 2003 Form 10-K, its interim financial
statements for the fiscal quarters ended March 31, June 30 and September
30, 2004. In addition, Hollinger International stated that it would work
expeditiously to file its 2004 Form 10-K, which will include its audited
financial statements and related MD&A for the fiscal year ended December
31, 2004. While Hollinger International has said it expects to file a
request with the SEC for a 15 day extension beyond the required filing
date of March 16, 2005 to complete and file the 2004 Form 10-K, because
of the anticipated work involved in the audit, Hollinger International
noted that it may not be able to complete and file the 2004 Form 10-K by
March 31, 2005.

Inspection

Ernst & Young Inc. (the "Inspector") is continuing the inspection of
Hollinger's related party transactions pursuant to an Order of Justice
Colin L. Campbell of the Ontario Superior Court of Justice. The
Inspector has provided six interim Reports with respect to its
inspection of Hollinger. Hollinger and its staff continue to give their
full and unrestricted assistance to the Inspector in order that it may
carry out its duties, including access to all files and electronic data.

To March 4, 2005, the cost to Hollinger of the inspection (including the
costs associated with the Inspector and its legal counsel and
Hollinger's legal counsel) is in excess of C$5.25 million.

Supplemental Financial Information

As of the close of business on March 4, 2005, Hollinger and its
subsidiaries (other than Hollinger International and its subsidiaries)
had approximately US$86.42 million of cash or cash equivalents,
including restricted cash, on hand and Hollinger owned, directly or
indirectly, 782,923 shares of Class A Common Stock and 14,990,000 shares
of Class B Common Stock of Hollinger International. The increase in
Hollinger's cash and cash equivalents on hand during the period since
its February 21, 2005 status update is due to the receipt by Hollinger
on or about March 1, 2005 of a second special dividend, this one of
US$3.00 per share (net of withholding taxes), on its holdings of shares
of Class A and Class B Common Stock of Hollinger International. Based on
the March 4, 2005 closing price of the shares of Class A Common Stock of
Hollinger International on the New York Stock Exchange of US$11.50, the
market value of Hollinger's direct and indirect holdings in Hollinger
International was US$181,388,614. All of Hollinger's direct and indirect
interest in the shares of Class A Common Stock of Hollinger
International are being held in escrow in support of future retractions
of its Series II Preference Shares. All of Hollinger's direct and
indirect interest in the shares of Class B Common Stock of Hollinger
International are pledged as security in connection with Hollinger's
outstanding 11.875% Senior Secured Notes due 2011 (the "Senior Notes")
and 11.875% Second Priority Secured Notes due 2011 (the "Second Priority
Notes"). In addition to the cash or cash equivalents on hand noted
above, Hollinger has previously deposited: (a) C$2.0 million in trust
with the law firm of Aird & Berlis LLP, as trustee, in support of
Hollinger's indemnification obligations to certain current and former
independent directors; and (b) approximately US$5.5 million in cash with
the trustee under the indenture (the "Senior Indenture") governing the
Senior Notes as collateral in support of the Senior Notes (which cash
collateral is also collateral in support of the Second Priority Notes,
subject to being applied to satisfy future interest payment obligations
on the outstanding Senior Notes as permitted by amendments to the Senior
Indenture). Consequently, there is currently in excess of US$177.8
million aggregate collateral securing the US$78 million principal amount
of the Senior Notes and the US$15 million principal amount of the Second
Priority Notes outstanding.

Company Background

Hollinger's principal asset is its interest in Hollinger International
which is a newspaper publisher, the assets of which include the Chicago
Sun-Times, a large number of community newspapers in the Chicago area
and a portfolio of news media investments. Hollinger also owns a
portfolio of revenue-producing and other commercial real estate in
Canada, including its head office building located at 10 Toronto Street,
Toronto, Ontario.

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