Emmis shareholders approve cut in conversion price on preferreds

New York, June 13 - Emmis Communications Corp. said its shareholders approved changes to its 6.25% series A cumulative convertible preferred stock that will lower the conversion price.

The vote confirms a settlement, announced June 2, to end a lawsuit filed by holders of the convertibles.

If the company's planned Dutch auction tender offer for its common stock is fully subscribed at the top end of the price range, the conversion price will be lowered to $30.00 from the current $39.0625, Emmis said in an earlier 8-K filing with the Securities and Exchange Commission.

The precise level will be set using a "special anti-dilution formula." In addition, any other tender or exchange offers will also trigger an anti-dilution adjustment based on the amount to be paid in the tender or exchange, Emmis' overall market capitalization and the market value of the class A common stock over a 10-day trading period ending on the date immediately before the first public announcement of the offer.

In addition to the adjustment to the conversion price, Emmis is giving holders of the convertible preferreds the right to require Emmis to redeem all or part of the securities on the first anniversary of a going private transaction in which Jeffrey H. Smulyan, Emmis' largest shareholder, or his affiliates participate. The redemption price would be the liquidation preference plus accrued dividends.

Emmis also agreed not to reduce the number of shares or change the price range for the Dutch auction tender offer and to pay some of the legal expenses of the convertible preferred holders.

Announcing the settlement, the Indianapolis broadcaster said it had entered into agreements with investors owning more than 66 2/3% of the convertibles.

The lawsuit was over the anti-dilution provisions of the securities.

Agreement allows Emmis to go ahead with its planned Dutch auction tender offer for its common stock.

In a PRER 14A proxy statement filed with the SEC, Emmis said the anti-dilution provisions of the convertible preferreds had been intended to keep the economic position of the holders substantially the same after events such as dividends, stock splits, tender offers and the like.

But Emmis said it "recently discovered that the anti-dilution provisions of its original second amended and restated articles of incorporation contained a mistake."

The provisions for tender offers "produce a disproportionate adjustment to the effect of any tender offer by Emmis or its subsidiaries on the economic position of holders of the convertible preferred stock," the company said. As a result the conversion price would have been lowered by far more than intended.

Under the new terms, changes of more than 15% of the company's capitalization will trigger the anti-dilution provision.

In that case, the conversion price will be adjusted proportional to the market value of the common stock, divided by the market value less the fair value of the tender offer or other payment.

For the planned Dutch auction, the conversion formula is the preferreds' liquidation preference divided by the sum of the liquidation preference divided by the conversion price plus 0.386 times the price paid for all the shares tendered divided by 400 million.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.