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Emmis restructuring plan to be heard by federal judge

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Emmis Communications Corp.’s proposal to strip preferred shareholders of their right to collect millions of dollars in dividends is set to be heard Friday in federal court in Indianapolis.

The shareholders are attempting to block the plan and have asked a judge to issue a preliminary injunction to prevent Emmis from holding a special meeting where investors would vote on the plan to weaken preferred shareholders’ rights.

Emmis hopes to rekindle interest in its common shares, in part by freeing itself of the obligation to pay four years of dividends to the holders of preferred stock.

The media company says it amassed voting control over about two-thirds of the preferred stock as a result of a buyback program it launched last fall with $35 million in funding from Chicago financier Sam Zell. The company purchased those shares at a huge discount from holders worried over the company’s perilous finances.

Emmis had planned to hold the special meeting to vote on the plan. But a group of the shareholders filed suit in April to try to prevent the move. A federal judge is set to hear arguments from both sides on Friday and ultimately will decide whether Emmis can proceed with its proposal. The hearing is expected to last one day.

Preferred shareholders Kevan Fight, Corre Opportunities Fund, Zazove Associates, DJD Group and First Derivative Traders allege that Emmis CEO Jeff Smulyan and the company’s board of directors ignored Securities and Exchange Commission rules, failed to file proper documentation, engaged in back-room deals and are illegally attempting to squelch their rights.

In an e-mailed statement to IBJ, Emmis said it “remains confident that all its actions were consistent with applicable state and federal laws.”

Emmis on Wednesday submitted to the federal court a list of witnesses that are expected to testify at the trial. They include Smulyan, Emmis Chief Operating Officer Patrick Walsh, and company board members Susan Bayh, Lawrence Sorrell and David Gale.

Shares of Emmis are fetching $1.43 each and rose above $1 in late April after the company announced two deals that will give it a $92 million cash infusion. The stock climbed as high as $1.63 on May 2 and has slid as low as $1.27 within the past month.

Emmis owns 17 FM and two AM radio stations nationwide, and seven city and specialty magazines. Locally, it operates WFNI-AM 1070, WIBC-FM 93.1, WLHK-FM 97.1 and WYXB-FM 105.7, as well as Indianapolis Monthly magazine.
 

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  • rule change
    Unless there's something in it for them, shareholders of the preferred stock have reason to fighht this. This sounds like Emmis is changing the rules in the middle of the game.

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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