Emmis accepts 6.3% of outstanding 6.25% convertibles in tender offer

By Angela McDaniels

Tacoma, Wash., Jan. 5 - Emmis Communications Corp. said it accepted for purchase 164,440 shares of its 6.25% series A cumulative convertible preferred stock at a price of $15.56 each. The total cost is about $2.6 million, excluding fees and expenses.

A modified Dutch auction tender offer for the convertibles ended at 5 p.m. ET on Dec. 30. The company announced on Jan. 3 that it expected to accept for purchase 164,400 convertibles, which represents 6.3% of the convertibles outstanding as of Dec. 30.

Once the offer is settled, 2,448,020 convertibles will remain outstanding, according to a company news release.

The company offered to purchase up to $6 million of the convertibles at a minimum price of $14.00 and a maximum price of $15.56. The convertibles have a liquidation preference of $50.00 each.

If the offer had been fully subscribed, the company could have purchased between 385,604 and 480,000 convertibles, depending on the final purchase price.

The offer is being financed with amounts drawn under Emmis' Nov. 10 note purchase agreement with Zell Credit Opportunities Master Fund, LP.

Zell agreed to buy up to $35 million of notes due February 2015 from Emmis on up to four separate occasions by Feb. 2. Interest on the notes will accrue quarterly at a rate of 22.95% per year and is not payable in cash.

The tender offer was not conditioned on any minimum number of convertibles being tendered.

Lock-up agreement

As previously reported, a group of convertibles holders entered into a lock-up agreement on Dec. 12, according to schedule 13D filings with the Securities and Exchange Commission.

The group includes Zazove Associates, LLC, Corre Opportunities Fund, LP, Kevan Fight and DJD Group, LLLP. They agreed not to sell, assign, transfer or otherwise dispose of any convertibles without the prior written consent of at least two locked-up holders that hold at least two-thirds of the preferreds subject to the lock-up agreement.

As of Dec. 22, the group owned 784,860, or 30.4%, of the convertibles.

According to a schedule 13D filing, if the company holds at least two-thirds of the outstanding convertibles following the completion of the tender offer, it may elect to make any or all of the following changes:

• Reduce or eliminate the liquidation preference of the convertibles;

• Remove the change-of-control put option;

• Remove the company's obligation to pay the dividends that are currently accrued;

• Change the designation of the convertibles from cumulative to non-cumulative so that dividends cease to accrue;

• Eliminate the rights of the holders to nominate directors to the board of directors as a result of arrearages in dividends; and

• Eliminate the restrictions on the company's ability to pay dividends or make distributions on its class A common stock and its class B common stock prior to paying accrued dividends on the convertibles.

On Nov. 22, the company announced an agreement to buy 1,035,925 convertibles from Alden Global Distressed Opportunities Master Fund, LP and said it would have 56.8% of the convertibles following the purchase.

BNY Mellon Shareowner Services (866 301-0524 or collect 201 680-6579) is the information agent and depositary for the tender offer.

Indianapolis-based Emmis operates radio stations and publishes magazines.

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