IBJNews

Emmis turns to Zell to finance repurchase of stock

Scott Olson
November 11, 2011
Keywords
Back to TopCommentsE-mailPrintBookmark and Share

A fund affiliated with Chicago real estate tycoon Sam Zell is providing financing that will allow Emmis Communications Corp. to repurchase tens of millions of dollars of its preferred stock at a huge discount—-the latest bid by the heavily leveraged company to gain financial breathing room.

Under the plan announced Friday, the Indianapolis-based media company will repurchase the shares from certain unidentified holders of the preferred stock for less than the current market price of $16 a share.

The preferred stock already is trading at a deep discount, in part because of investor anxiety over the company's heavy debt load. In addition, because of its financial struggles, Emmis has suspended making its quarterly dividend payments on those shares since October 2008. The payments normally would total more than $2.4 million a quarter.

The company has $140 million in preferred stock outstanding. However, based on the current price, those shares are trading for just $42 million.

Even after buying back preferred stock, however, Emmis still would be saddled with hundreds of millions of dollars in long-term debt.

“It’s not like this gets [Emmis] out of the hot water, in terms of their overall leverage situation,” said Mark Foster, chief investment officer of Columbus-based Kirr Marbach & Co. “But it looks like it improves it.”

He added: "The owners [of the preferred stock] may say, 'This is better than nothing. Let's take it and move.'"

In October, Emmis said that for the first six months of its fiscal year, it lost $13.1 million on revenue of $125.8 million, compared with a loss of $6.3 million on revenue of $126.9 million during the same period in 2010.
 
To finance the preferred stock purchases, Emmis is borrowing up to $35 million from Zell, which it will need to pay back by February 2015, at an annual interest rate of 23 percent..

While the interest rate may seem high, Emmis apparently expects to more than offset those costs by reducing its future obligations on the preferred stock.

“There would be a cash-flow savings and an interest savings,” Foster said. “It would appear to make some sense to do.”

Emmis’ struggles to pare down its debt have weighed on the company’s stock price for years.

Company shares traded Friday morning at 86 cents each, up 10 cents from their opening price, perhaps bolstered by the plan to purchase the preferred stock.

In September, the NASDAQ exchange warned Emmis for the third time in two years that its stock could be delisted.
 
The stock had closed below the exchange’s minimum $1-per-share requirement for 30 straight business days. Emmis shares would have to rise to at least  $1 for at least 10 consecutive business days before Feb. 27 to stay in compliance.

Emmis recently completed the sale of three big market radio stations, generating $120 million in cash, with much of it going toward repaying debt. Emmis CEO Jeff Smulyan said in September that he expects the debt reduction will push the stock above $1 again.





 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Good Day I am Mr (Victoria Wright) from United state of America, i stayed in NEW YORK, and i have a broke up business, until i found this company email who help me to gain a loan for business,, and now i want to used this short medium to congratulate the below company for the fast and safe money they loan to me without any form of collateral, i loan 500,000USD from the company to save my business and lots more, i saw their mail on the internet, everyone always give testimony for what they did, so i quickly contacted them and they all did everything for me without stress and my money was sent to my account just 3 days later, i was surprise and i feel so glad, now i have a standard business control agent who help me, now i will advice those who need urgent loan to contact him at the bellow email:zenithfirm12@gmail.com

  2. NOTICE:This is to inform the general public that Vampires are real. My name is James Franklyn.,am an agent of vampire,am here to introduce our new world trend to you,a world of vampire where life get easier,we have made so many persons vampires and have turned them rich,you will be assured long life and prosperity,you shall be made to be very sensitive to mental alertness,stronger and also very fast,you will not be restricted to walking at night only even at the very middle of broad day light you will be made to walk.In case you are wildly oppressed by some unscrupulous persons we can still help you fight them.Your protection is assured immediately you join.Just contact the bellow email if you are interested we are here to attend to you anytime you want us. Contact the bellow email for more details. Email:vampirescreed@hotmail.com Sincerely: James Franklyn.

  3. Bravo! Someone else that is willing to speak the truth! Bravo!_____NBCSN is available in almost 2 MILLION more homes than just a few years ago, but Indycar STILL gets less total viewers than it did just a few years ago when NBC took over Versus. Attendance and ratings cratered with the end of season races (just when the title battle got "interesting" HAH!__________And now...new race in Basilia, where Miles celebrated the "rich history" of Indycar racing there. Rich history? What, 7 events in the 100 years of AOW? Yep, some history. Well, at least its an oval. It's not??? Are you kidding me??? Gosh darn road racin furriners.

  4. PURITY RAY LOAN OFFER........ Have you been denied by your banks,or are you in need of of an urgent loan to pay of your bills we are capable of giving loans @ cheaper rate to interested individuals, student, companies and members of the public in need of finance to settle bills, we do offer considerable loans which you can count on. For more information on our various types of loan,then you will have to contact PURITY RAY LOAN FIRM, to help you achieve your desire LOAN APPLICATION FORM TO BE FILLED BORROWERS INFORMATION * Full name:………………………. * SEX * ……………………………. * Country………………………….. * State:……………………………. * Land:…………………………….. * Occupation:…………………….. * phone number:…………………. * Telephone: ………………………….. * Age:………………………………. * Amount needed as loan:……… * Loan Duration:………………….. * Propose of Loan:……………….. * Annual revenue:………………… * Monthly Income:……………….. * Guarantee:………………………. * Payment: monthly or annually Email.....purityrayloanfirm@gmail.com Thank you and God bless Mr Purity Ray PURITY RAY LOAN FIRM we tend to serve you better

  5. Problem: most of the people responding to this article don't know about this service AT ALL! Why? Lack of awareness. This isn't IndyGo. This is CIRTA: might as well be the mattress company because they are asleep at the wheel - something like 3 directors over the last year? Playing with federal grant money is great! This "region" wants commuter rail service, has spent MILLIONS on Transportation studies yet can't even support a commuter bus line? This is largely for suburban riders to get to downtown - not for "service people to work in our hotels and restaurants" ! Get your head out of your backside!! These are professionals, students etc. that don't want to fight traffic, save some money on parking, gas, stress.... if CIRTA would put their federal money into widely promoting the sevive to Greenwood, Fishers & Carmel instead of finding directors and studies - this would be a successful service. Our family uses(d) it daily for the last several years - but the recent uncertainty & now unreliability due to cuts from Carmel has been a problem. Now, costs us an additional $350/month for gas & parking ( $4200/year) plus vehicle wear, service, environmental impact ... YES - this REGION needs this this type of service in order to keep growing and getting the people it needs to fill skilled positions in downtown Indianapolis. Think outside of your own car !!!

ADVERTISEMENT