Sam Zell fund helps Emmis buy back some preferred shares


Emmis Communications announced that it signed agreements with certain holders of its 6.25% Series A Cumulative Convertible Preferred Stock to buy back their preferred shares. To fund the purchases, Emmis has cut a deal with Zell Credit Opportunities Master Fund, LP, a fund that Sam Zell launched in 2009 to primarily target distressed commercial real estate securities.

“Emmis entered into securities purchase agreements with certain holders of its Preferred Stock under which Emmis will purchase shares of its Preferred Stock from such holders at prices that are below the closing price of the Preferred Stock on November 10, 2011. The purchases will settle pursuant to total return swaps, the terms of which provide that until final settlement of the swaps, the seller agrees to vote its shares in accordance with the prior written instructions of Emmis,” the company explained.

We understand that Emmis has the opportunity to buy back the preferred shares at about 25% of face value from holders who want liquidity.

So, how does the Zell fund come into play?

“Under the terms of a Note Purchase Agreement, Zell Credit Opportunities Master Fund, LP has agreed to buy from Emmis on up to four separate occasions on or before February 2, 2012, a total of up to $35,000,000 of unsecured notes.  The net proceeds from the notes are expected to be used to enable Emmis to ultimately acquire some of its Preferred Stock through privately negotiated transactions with individual Preferred Stock holders and/or through a tender offer. Interest on the notes is not payable in cash and will accrue quarterly at a rate of 22.95 percent per annum.  The notes will mature in February of 2015, and contain customary representations, warranties, and indemnities, as well as covenants that are comparable to those in Emmis’ senior secured credit facility, including the prohibition of any dividend payments on Emmis’ capital stock and certain restrictions on the ability of Emmis to incur additional indebtedness.”

Emmis said it may enter into additional transactions to purchase its Preferred Stock in the future.
Paul, Weiss, Rifkind, Wharton & Garrison LLP and Taft Stettinius & Hollister LLP served as legal counsel and Moelis & Company served as financial advisor to Emmis.

Methuselah Advisors served as financial advisor to Zell Credit Opportunities Master Fund, L.P.

RBR-TVBR observation: Wow! Check out the interest rate that Zell is collecting: 22.95%. We have credit cards with better rates than that.