What Emmis actually said


Wall Street traders apparently got excited over a headline in Clear Channel-owned Inside Radio that Emmis Communications is “actively pursuing” asset sales, even though the story below the headline noted that Emmis had been saying the same thing for quite some time. But the stock price for Emmis shot up by more than 40% on Wednesday.

As RBR-TVBR noted in our report, “Emmis also continues efforts to sell some big market stations, but there was nothing new to report on that front.”

In fact, Emmis said less about the station sales effort in the latest SEC filing than it had in earlier reports when it singled out stations in New York and Chicago that it might sell. The latest reference to possible sales came only in the context of discussing compliance with its credit facility.

Here is what Emmis said in the 10-Q filed on Tuesday:

“While the Company is currently in compliance with all of the financial and non-financial covenants in the Second Amendment to its Credit Facility, the suspension of certain covenants provided by the Second Amendment expires on September 1, 2011. After September 1, 2011, the Company must maintain compliance with the original financial and non-financial covenants in its Credit Facility, which are more restrictive. Absent asset sales, which the Company is actively pursuing, the Company believes it is unlikely it will be able to maintain compliance with the financial covenants after September 1, 2011. Non-compliance with the financial covenants would be considered an event of default under our Credit Agreement, giving our lenders the right, among other things, to accelerate the maturity of our Credit Agreement indebtedness. The terms of the Credit Agreement also state that the issuance of an opinion by our independent auditors that is modified to express substantial doubt about Emmis’ ability to continue as a going concern is an event of default under the Credit Agreement. Our ability to maintain compliance with our financial and non-financial covenants throughout fiscal 2012 and the adequacy of our plans to address the impact of non-compliance on our liquidity will be factors considered by our auditors in rendering their opinion on our financial statements for the year ending February 28, 2011, which are expected to be issued in May 2011.”

Emmis closed up 36 cents at $1.22 on Wednesday.