Getting common shareholders to hand over their shares for a buck-46 each was the easy part. Now Ion Media Network and its new owners, Citadel/NBC Universal, have begun a tender for the preferred stock issues not owned by NBC Uni. Those preferred owners had insisted all along that they should be paid more.
The exchange offer is structured so that preferred holders who agree to exchange their current securities for a combination of new convertible bonds and new preferred shares will move up in the financial structure, and they get a slightly better deal if more than 50% of the old securities are exchanged. But if less than 90% of those old preferred shares are exchanged, NBC Uni itself will exchange its own preferred shares for new notes, up to the full 470,584,689 value of its holdings, and move ahead of the other preferred holders in the pecking order.
SmartMedia observation: Although the non-NBC preferred shareholders had demanded more and at one point teamed up to make their own bid for a financial restructuring, which would have required a Chapter 11 filing and got nowhere with Ion's board, the preferred holders recently made an SEC filing indicating that they are no longer working together as an "ad hoc committee." We would think that many of the preferred holders, particularly those who bought in at a discount to face value, will decide to take the exchange offer as the best deal they are likely to get. Someone may yet sue, but if there aren't many holdouts, there won't be as large a potential settlement pot to entice the lawyers to fight this battle.