Leverage, Or A Different Kind Of Two-Edged Sword

It's interesting that the Breeden Report [copy of it courtesy of the Chicago Tribune] used the word "levered" on p. 2: the subsequent fate of all three companies gives a fresh reminder to the concept that leverage is a two-edged sword. Over the last three years, from early April 2004 to today:

- The price of Sun-Times Media Group (formerly Hollinger International) common shares has declined close to 74%, from approx. $20/share to its most recent close of $5.30 (derived from this chart and its most recent quote);

- The common shares of parent company Hollinger Inc. has declined close to 95%, from about C$7.20/ share to its most recent close of 38 Canadian cents (derived from this chart);

- The parent company of Hollinger Inc., Ravelston, filed for bankruptcy on April 20, 2005, as did Argus and five associated companies associated with the latter. (Found in this Hollinger Inc. Status Update, in the second-to-last item, "Ravelston Receivership and CCAA Proceedings.") Since the bankruptcy proceedings are still in mid-stream, due to what could euphemistically described as "legal complications," there's no way of telling how far it's sunk. I suspect, though, that "declined close to 100%" is pretty accurate.

A sobering lesson for anyone who still believes in the efficaciousness of holding companies. FYI: Conrad Black was ousted from Hollinger International in December, 2003, and from the chairmanship of Hollinger Inc. on Jan. 18, 2004. (See this timeline.) The time between each ouster and April 2004 is enough for the "Black Factor," depressing the shares of each, to have vanished.

The Breeden Report was released on August 31, 2004.

[Thanks to Mark Steyn for bringing this subject up. Gordon Paris was CEO of Hollinger Int'l from about November 19, 2003, until Nov. 15, 2006.]


Also: as this August 2005 Canadian Business article recounts, Conrad Black being ridiculous with regard to Al Capone may have a very unhumorous blowback, in the end.


[Someone else may learn the hard way that ridiculousness of this sort does make one a marked man in moralizing times.]