Is controlling 2/3 of the preferred like a "cramdown"...
...in a court based financial restructuring (i.e. bankruptcy)? It would seem to me that the legal argument (and I would hope there is precedent for this) is that the "resolution" of 2/3 of the preferred stock, for an average price around $16, represents a "good faith fair market valuation" for the preferred, and that the legal indenture, presumptively permits Emmis to "resolve the rest of it" now. Is that not the intent of setting up the indenture where if 2/3 agree to something, it can be done?
I can't imagine Emmis is going to lower the liquidation preference to zero, or any other such abusive nonsense....but with controlling 2/3 of the preferred, which control was obtained in ARMS LENGTH transactions with 3rd parties, it would seem to suggest to me that it is GAME OVER for the preferred, and Emmis has the "right to retire" the rest of it. We're really just down to the issue of price here. That price could be a weighted average of the prices paid to date, the last price paid ($21.50), or, I'm guessing, something modestly higher, to avoid a legal fight, and get this thing resolved as quick as possible. I guess the other option would be to roll over the remaining preferred into a new instrument, kind of like they were looking to do in the going private transaction 1 1/2 years ago. But I'm sure that paper would be on decidedly less attractive terms than 1 1/2 years ago.
It must be particularly painful, for the preferred holders, that THEIR repeatedly holding out for a better deal, in the summer of 2010, probably delayed the deal long enough to cause Alden to walk away, which left all of us (common and pfd holders) holding the bag. And now, with EMMS controlling 2/3 of the preferred, the lockup group is NOT in the position to hold the company, or Jeff, "over a barrel," with the drama of rescheduled Special Meetings, week after week after week.
Emmis is in the driver's seat now. And I would imagine they will be just as aggressive in pursuing the company's interest, as the lockup group was in pursuing its interest in the summer of 2010. (But, frankly, I suspect Emmis management will be more reasonable. Let's hope the lockup group is equally reasonable.)
The cost basis for pretty much everyone remaining in the preferred is low. No one is "entitled" to the liquidation preference. 2/3 of the preferred shareholders already, functionally, voted to lower the value of the preferred, is the way I see it. The indenture, FUNCTIONALLY, providees that "out." Anyone who bought the preferred should know that was a risk.
It's time for that "orphan" security to be retired.