Already facing a lawsuit from some holders of its 14.25% preferred shares (6/15/07 TVBR #117), Ion Media Networks has now been sued as well by some holders of its 9.75% preferred shares. If you've guessed that the lawsuit claims they are being shortchanged in the restructuring of Ion by NBC Universal and Citadel Investment Group, then you have likely been following this saga right along. "The Company believes that the complaint is without merit as to it and all of the director defendants. The Company and the director defendants intend to vigorously defend against the complaint," Ion said in response to the latest lawsuit, which is pretty much the same as its response to the first one.
SmartMedia observation: What may be most important is what has not happened in this case. The Delaware Chancery Court, where both lawsuits have been filed, has thus far refused to issue any temporary restraining order sought by the plaintiffs who are suing Ion. Thus, the exchange offer they are protesting is still on track to close one minute after midnight on July 10th. The exchange offer has given holders of both preferred issues the option to exchange their preferred shares for new bonds, albeit with a lesser face value, and move up in the company's capital structure. However, if certain thresholds are not met, NBC Universal will be able to exchange its own preferred shares for the new bonds and jump ahead of the other preferred shareholders in Ion's capital structure. We wait to see how many of the preferred shares are exchanged for the new bonds. Certainly some large holders have decided to take Ion up on the exchange offer, figuring that it's better to move up in the capital structure and reduce their risk – and if they bought those depressed preferred shares in recent years – likely book a profit as well.