Andrea Muirragui Davis, The IBJ
adavis@ibj.com
Indianapolis-based Emmis Communications Corp. has wiped out more than $69 million of debt, repurchasing some of its term loans for less than half of face value.
The beleaguered company, which has been staggering under the weight of more than $400 million in debt, in March amended terms of its credit agreements, getting permission from its lenders to spend up to $50 million to buy back debt.
Since April 14, it has paid $38.9 million for loans with a value of $69.3 million - a 56 percent discount, according to disclosures filed with the U.S. Securities and Exchange Commission. A final repurchase agreement is expected to be made public on Monday.
Emmis paid for the loans with proceeds from the sale of its New Orleans television station, the lease of one of its Los Angeles radio stations, the sale of the corporate jet and a large payment from its national representation agency.
The debt, held by a consortium of lenders in a so-called collateralized loan obligation fund, already was trading at a discount.
Even so, Moody's Investors Service took a dim view of the move, saying the loan buybacks constitute a default. Moody's downgraded Emmis' corporate credit rating April 27, saying "Emmis faces a high probability of further default."
Indeed, Emmis was among a number of radio companies included on Moody's March "Bottom Rung" list of companies it considers most likely to default on loans or declare bankruptcy.
Emmis has been reeling from the nation's economic woes in general and their effect on the radio business in particular. Last month, the company said unaudited results show revenue fell nearly 20 percent during its fiscal fourth quarter.
Calling the ad climate "incredibly weak," Emmis said it hired a financial adviser to explore restructuring some of its debt. It borrowed $71 million last month, "primarily for liquidity," Chief Operating Officer Patrick Walsh said at the time.
Walsh today called Moody's actions a reaction to the challenges many media companies are facing, but said Emmis continues to be "reasonably well-positioned" relative to its peers in radio and magazine publishing.
"We are doing everything we can to make sure we get off that [Bottom Rung] list as soon as possible," he said.
Moody's has downgraded other companies' ratings after similar loan buybacks, but Walsh said the shift has been temporary.
Emmis shares held steady today at 35 cents apiece.