Emmis buys first block of preferred shares

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Having put together financing via a Sam Zell hedge fund, Emmis Communications has begun buying back its preferred shares. In the first deals Emmis has paid $11.7 million for preferred shares with a face value of $32.2 million.


The sellers of the 645,504 preferred shares were not identified. To refresh your memory, it was a group of preferred shareholders who banded together to demand better terms in last year’s proposed deal by Emmis CEO Jeff Smulyan and Alden Global Capital to take Emmis private – only to have Alden walk away after the preferred holders agreed on a revised offer from Smulyan. Those dissatisfied preferred shareholders then held 969,858 of the 2.8 million preferred shares, so it is quite possible that some members of that group are now selling.

Emmis reported to the SEC that it has purchased the 645,504 shares of its 6.25% Series A Cumulative Convertible Preferred Stock at a weighted average price of $15.25 per share, which constitutes approximately 23% of the total outstanding shares of the Preferred Stock. “Most of the shares were purchased pursuant to the terms of total return swaps, and these sellers have also entered into agreements to vote their shares in accordance with the prior written instructions of Emmis,” the filing stated. “Emmis may enter into additional transactions to purchase its Preferred Stock in the future,” it added.

The closing price for the preferred shares on Nasdaq Monday (11/14) was $15.12. They had traded as high as $22.74 and as low as $11.67 in the past 52 weeks.

Including fees and expenses, Emmis has drawn $11.7 million of the $35.0 million available to it under the Note Purchase Agreement with Zell Credit Opportunities Master Fund, L.P. dated November 10, 2011, according to the SEC filing.

RBR-TVBR observation: Wiping $32.2 million of obligations off your balance sheet for $11.7 million is obviously a good deal, even if you do have to pay Zell nearly 23% interest on the money to get the deal done.