Spanish Broadcasting System Faces Suit By Preferred Stock Investors

Defendant

SPANISH BROADCASTING SYSTEM, INC. is being sued by eleven investment funds which claim SBS violated its duties to preferred stockholders and seek redemption of $161 million in preferred stock plus prevention of SBS from adding additional debt, reports LAW360.

The plaintiffs, CEDARVIEW OPPORTUNITIES MASTER FUND L.P., CETUS CAPITAL III L.P., CORRIB CAPITAL MANAGEMENT L.P., LITTLEJOHN OPPORTUNITIES MASTER FUND L.P., RAVENSOURCE FUND, STONEHILL INSTITUTIONAL PARTNERS L.P., STONEHILL MASTER FUND LTD., STORNOWAY RECOVERY FUND L.P., VSS FUND L.P., WEST FACE LONG TERM OPPORTUNITIES GLOBAL MASTER L.P., and WOLVERINE FLAGSHIP FUND TRADING LTD., hold about $85.3 million (94.16%) of SBS preferred stock as of SEPTEMBER 30th and $28.8 million of SBS' outstanding senior notes.  They charge that SBS' separate deal with holders of 12.5% of the company's 12.5% Senior Notes violated the plaintiffs' rights under their stock certificates, paying the other noteholders while leaving the plaintiffs less likely to recover their investments. 

An attempt to negotiate their own deal, the plaintiffs contend, was met with an "unworkable counter-proposal with unsatisfactory asset sales goals, an unacceptable proposed rights offering, and a massive haircut for the Series B holders, while leaving significant value for out-of-the-money common equity."  The suit also alleges that ROYAL BANK OF CANADA proposed a 50% loss of equity to the preferred stockholders while transferring $50 million to common stockholders, which the plaintiffs say would violate a bankruptcy court rule.

« see more Net News