Hollinger Inc.

Hollinger Inc.

October 21, 2005 12:01 ET

Hollinger Inc.: Status Update: October 21, 2005

TORONTO, ONTARIO--(CCNMatthews - Oct. 21, 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, as amended, was issued. These guidelines contemplate that Hollinger will 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

The Board of Directors of Hollinger has established a Litigation Committee, comprising Stanley Beck, David Drinkwater and Newton Glassman, to oversee and provide guidance regarding litigation involving Hollinger.

A scheduling hearing in the enforcement proceedings against Hollinger and others brought by the Ontario Securities Commission, originally returnable October 11, 2005, has been adjourned to November 16, 2005.

Hollinger has brought a motion seeking direction with respect to certain entitlements claimed by former directors. A schedule for the exchange of materials and hearing of the motion will be established by the Court on October 25, 2005.

A motion brought by Hollinger, returnable October 5, 2005, seeking an Order compelling the release of certain hard drives so that Hollinger may comply with a subpoena from the U.S. Securities & Exchange Commission ("SEC") has been adjourned to October 27, 2005.

Financial Statements

As previously reported, Hollinger's 2003 and 2004 annual financial statements cannot currently be completed and audited for various reasons.

Hollinger has also been unable to file its annual financial statements, Management's Discussion & Analysis and Annual Information Form for the years ended December 31, 2003 and 2004 on a timely basis as required by Canadian securities legislation. Hollinger has not filed its interim financial statements for the fiscal quarters ended March 31, June 30 and September 30, 2004 and March 31 and June 30, 2005.

Hollinger has 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 (the "Alternative Financial Information"). The Alternative Financial Information, which may be found as part of Hollinger's press release issued on March 4, 2005, was prepared by the management of Hollinger at that time and was not audited or reviewed by Hollinger's auditors.

Hollinger's Board of Directors has established an Audit Committee, which will consider alternatives to provide additional financial information to the public


Ernst & Young Inc. (the "Inspector") is continuing the inspection (the "Inspection") of certain of Hollinger's related-party transactions pursuant to an Order of Mr. Justice Campbell of the Ontario Superior Court of Justice. The Inspector has provided nine interim reports with respect to its inspection of Hollinger. The Inspector is expected to provide a further report to the Court by October 31, 2005.

Through October 14, 2005, the cost to Hollinger of the Inspection (including the costs associated with the Inspector and its legal counsel, as well as Hollinger's legal counsel) is in excess of C$12.9 million.

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.

Supplemental Financial Information

As of the close of business on October 14, 2005, Hollinger and its subsidiaries (other than Hollinger International and its subsidiaries) had approximately US$60.0 million of cash or cash equivalents on hand, including restricted cash, other than as described separately below. At that date, 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. Based on the October 14, 2005 closing price of the shares of Class A Common Stock of Hollinger International on the New York Stock Exchange of US$9.12, the market value of Hollinger's direct and indirect holdings in Hollinger International was US$143.8 million. 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 the Notes. In addition to the cash or cash equivalents on hand noted above, Hollinger has previously deposited: (a) approximately C$8.5 million in trust with the law firm of Aird & Berlis LLP, as trustee, in support of Hollinger's indemnification obligations to six former independent directors and two current officers; and (b) approximately US$572.0 thousand in cash with the trustee under the Indenture governing the Senior Notes as collateral in support of the Senior Notes (which cash collateral is also collateral in support of the Second Secured Notes, subject to being applied to satisfy future interest payment obligations on the outstanding Senior Notes).

There is currently in excess of US$137.3 million aggregate collateral securing the US$78 million principal amount of the Senior Notes and the US$15 million principal amount of the Second Secured Notes outstanding.

Ravelston Receivership and CCAA Proceedings

On April 20, 2005, Mr. Justice James Farley of the Ontario Superior Court of Justice (the "Court") issued two orders by which The Ravelston Corporation Limited ("Ravelston") and Ravelston Management Inc. ("RMI") were: (i) placed in receivership pursuant to the Courts of Justice Act (Ontario) (the "Receivership Order"); and (ii) granted protection pursuant to the Companies' Creditors Arrangement Act (Canada) (the "CCAA Order"). Pursuant thereto, the Receiver was appointed receiver and manager of all of the property, assets and undertakings of Ravelston and RMI. On May 18, 2005, Mr. Justice Farley further ordered that the Receivership Order and the CCAA Order be extended to include Argus Corporation Limited and five of its subsidiary companies which collectively own, directly or indirectly, 61.8% of the outstanding Retractable Common Shares of Hollinger (collectively such entities, including Ravelston and RMI are referred to as the "Ravelston Entities"). The Court has extended the stay of proceedings against the Ravelston Entities to January 18, 2006.

On August 18, 2005, the United States Attorney for the Northern District of Illinois (the "US Attorney") returned an indictment (the "Indictment") against Ravelston and others pursuant to which they have been charged with five counts of mail fraud and two counts of wire fraud in violation of Title 18, United States Code, Sections 1341, 1343, 1346, and 2. Neither Ravelston nor the Receiver on behalf of Ravelston has been served with the Indictment.

On October 3, 2005, the Receiver brought a motion seeking certain relief and direction with respect to the Indictment. Specifically, the Receiver requested that the Court grant an Order authorizing and directing the Receiver on behalf of Ravelston to voluntarily accept service of the summons to the Indictment and voluntarily appear and enter a plea of not guilty on behalf of Ravelston. The Court granted this relief on October 4, 2005. Counsel for Conrad Black has appealed that decision. Counsel for Mr. Black has further asserted that an automatic stay applies. A motion was brought, returnable October 11, 2005, in the Court of Appeal to determine, inter alia, the stay issue. On October 11, 2005, the Court determined that a single judge did not have the jurisdiction to decide the motion. Therefore a full panel of the Court of Appeal must be convened. As a result, the motion was heard by a panel of judges on October 18, 2005. The Court of Appeal reserved its decision.

Company Profile

Hollinger's principal asset is its approximately 66.8% voting and 17.4% equity interest in Hollinger International, a newspaper publisher with assets 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 commercial real estate in Canada. Further information can be obtained at www.hollingerinc.com.

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