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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. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

  2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

  3. Clearly, there is a lack of a basic understanding of economics. It is not up to the company to decide what to pay its workers. If companies were able to decide how much to pay their workers then why wouldn't they pay everyone minimum wage? Why choose to pay $10 or $14 when they could pay $7? The answer is that companies DO NOT decide how much to pay workers. It is the market that dictates what a worker is worth and how much they should get paid. If Lowe's chooses to pay a call center worker $7 an hour it will not be able to hire anyone for the job, because all those people will work for someone else paying the market rate of $10-$14 an hour. This forces Lowes to pay its workers that much. Not because it wants to pay them that much out of the goodness of their heart, but because it has to pay them that much in order to stay competitive and attract good workers.

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  5. It is sad to see these races not have a full attendance. The Indy Car races are so much more exciting than Nascar. It seems to me the commenters here are still a little upset with Tony George from a move he made 20 years ago. It was his decision to make, not yours. He lost his position over it. But I believe the problem in all pro sports is the escalating price of admission. In todays economy, people have to pay much more for food and gas. The average fan cannot attend many events anymore. It's gotten priced out of most peoples budgets.

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