The arrangement with the preferred is contractual. That contract allows for changes to a number of provisions of the preferred, if the company can "get the votes" of 2/3 of the preferred. 2/3 of the preferred shareholders sold back their stock at an average of about $16. The company was generous in allowing the preferred to maintain its $50 liquidation preference in its proxy. I believe it would have been within its perogatives to lower the preference to either one of 1) the weighted average price of the shares it bought in over the prior few months, or 2) the highest price ($21.50?) it paid for preferred shares in the prior few months.
What if one of the conditions of buying back the 2/3 of the pfd stock would have been that Emmis asked the holders, up front, to vote to lower the liquidation preference to, say, $16. They could have had a Special Shareholder meeting of the preferreds, and got 2/3 to vote for that. However, no doubt, the preferred holders wanted liquidity QUICKLY, and Emmis had a window to strike with the Zell money, in order to create value for both the common, and preferred holders who wanted to sell. So, instead, they are changing the governing documents of the preferred afterwards. (That makes it seem a lot less "sinister," to those who are crying foul.)
The bottom line is that they control 2/3 of the outstanding preferred, which in my world, makes the preferred a functionally "orphaned" security. As stated before, I'd like to see the parties come to terms, and those shares outstanding totally retired. I mean, Alden controlled roughly $60 million of preferred, at its theoretical liquidation preference, and they sold those back to the company at 25 cents on the dollar, roughly. They didn't leave $45 million on the table because they thought they could get the better of Emmis in a legal fight, apparently. They knew the preferred's market value, or had a notion in their mind, anyway...and they took it.