And it is also clearly a potential CATALYST for a higher stock price. (It SMELLS like the set up for a potential Smulyan buyout of the common, to me.) With a $50 par value, there is $140 M worth of pfd. stock outstanding, at face value. But, at, say, $15 a share, the total market value of that stock is only about $42 million. with a loan for upwards of $35 million, EMMS could buy back almost ALL of the pfd. stock, at a HUGE discount. Now, mind you, there are a lot of pfd. holders that are not going to want to sell their stock at $15, but they've already announced that they have lined up some people to purchase pfd. shares from.
I WELCOME a 22.95% interest rate, to retire preferred stock for maybe 30% of its par value. This is HUGELY accretive (in a book value sense), to common holders, and will only make the company MORE valuable to Mr. Smulyan, or anyone else, in a buyout.
I can't believe the common stock isn't up more today.
Notice that the Zell notes mature in 2015. This is after the expiry of the LMA and put agreement with Grupo. Smulyan probably plans to pay back the Zell notes with some of the proceeds from the $110MM it will receive once it puts the station back to Grupo.
Certainly matches the company's liability, under the Zell note, with future cash flows. which is good.
But I don't believe for a million years that Smulyan is interested in paying 22.95%, and keeping that outstanding for 3-4 years. I view the 22.95% interest being paid as a "short term device," to a goal that is much more nearer term (12 months or less). Whether that is another going private transaction, or a more substantive refinancing that allows the company to remain public, and begin growing again, remains to be seen. But with the common at 85 cents, it's hard to see, if the CEO resolves the issue of 1/3 of the pfd. holders stopping any going private transaction, why he wouldn't make another run at the company. It doesn't hurt that a 3% holder of the common (who was part of the class action to "stop" the deal last year), has now expressed support. (I believe, with ETM at %5.35, CMLS at $3, ROIAK at $1.35, and SALM at $2.50, that an EMMS deal at $2.40 is more credible, and "fairer," in this environment, even as I view the entire terrestrial radio industry as significantly undervalued. I guess what I'm saying, is that if Jeff Smulyan wants to give me an opportunity...in the short term...to cash out at $2.40, so that I can buy ETM at $5.35, and ride that up to $8-10, in the next 6-12 months, I'd welcome that opportunity.)