Paxson Denies NBCU Charge It Low-Balled Stake

Oct 14, 2004  •  Post A Comment

The ongoing tussle between NBC Universal and Paxson Communications took another turn Thursday after the struggling network denied NBCU’s charge that it was low-balling the value of NBCU’s 32 percent stake in Paxson.

Answering a claim filed by NBCU in August, Paxson requested that the Delaware Chancery Court settle once and for all whether Paxson is obligated to redeem the stake, as NBCU has asserted.

The issue before the Delaware court focuses on the 16.2 percent dividend rate that Paxson calculated for the Paxson series B convertible preferred stock that represents NBCU’s stake in Paxson. NBCU questions the calculation and Paxson’s selection of the investment bank that came up with the dividend rate.

“We decided it was in the best interests of our shareholders and the investment community to have the court confirm that under the plain and unambiguous terms of the investment agreement, we are not obligated to redeem the NBC preferred investment by Nov. 13, 2004, and will not be in default under the investment agreement if we do not redeem NBC’s investment,” Paxson Chairman and CEO Lowell “Bud” Paxson said in a statement.

Said an NBCU spokesman: “Our position is that we are entitled to redemption of our preferred shares by Nov. 13, 2004. We will take whatever actions are necessary to enforce our rights.”

The maneuvering is the latest in a yearlong battle between the two networks over the stake, which NBC purchased in September 1999 for $415 million.

Last November, NBC informed Paxson that it wanted to redeem its interest in Paxson, and has given Paxson until Nov. 13 to come up with the cash.

But Paxson, which has struggled for years under a mountain of debt and has had a difficult time finding success with its family friendly approach to programming, claims it is not required to pay NBCU, in part because the company doesn’t have enough cash on hand to make a payment and because the terms of its bank loans prevent it from making such a payment to NBCU.

The company said Thursday it is “highly unlikely” either of those conditions will change by Nov. 13.