Yesterday, Jeff Smulyan pulled the plug on his attempt to take Emmis Communications private, following Alden Global Capital announcing it would no longer help finance the deal. What is next for Emmis? According to the Indianapolis Business Journal, the company is still facing major amounts of debt. The IBJ says that Emmis has over $340 million in debt, though only $4 million of its debt is due within a year.
Emmis will need to renew its long-term debt though.Greg Hahn, President of Winthrop Capital Management Group, told the IBJ this could be a risky proposition. "If the bank doesn’t want to renew this facility, that’s going to be a challenge,” he said. “But I think Smulyan’s a great operator, and he’s got a great team."
"At some point it needs to generate enough income to pay interest and to pay down that debt," Hahn added. "But it’s not growing its capital base; it’s not throwing off a lot of cash." Mark Foster, Chief Investment Officer of Kirr Marbach & Co. told the IBJ that Emmis has "got to sort of hunker down, generate cash and work down that debt as best they can."
Addiitonally, RBR-TVBR reports that Emmis may take legal action against Alden Capital for pulling out of the proposed deal. The company sent a statement to the site, stating that "Despite several weeks of continuing talks, Alden refuses to honor the commitment they made. All parties to the negotiation are stunned and saddened by Alden's decision to not honor the negotiated deal. Emmis, JS Acquisition, and Jeff Smulyan will explore various legal remedies related to damages caused by Alden’s actions."
The statement concludes that "Emmis will continue as a public company and appreciates the overwhelming support of its common shareholders during this lengthy process. Emmis has taken important actions this fiscal year to generate revenue and cash flow growth and looks forward to working closely with its shareholders and employees to increase the value of the company as the radio and city/regional magazine industries continue to see improved operating results."