Equity Media Sells RTN to Ease Crunch

Equity Media Holdings concludes $18.5 million sale of Retro Television Network to insider Luken Communications.

Equity Media Holdings concluded an $18.5 million sale late Wednesday of its Retro Television Network subsidiary to insider Luken Communications, raising cash to deal with a capital squeeze.

Retro Television Network

Based in Little Rock, Ark., and publicly traded, Equity Media disclosed financial problems in its amended annual report in April.

In Wednesday’s deal, Equity Media sold RTN to an entity controlled by its largest shareholder, Henry Luken III. Independent directors received a fairness opinion on the transaction. The company can repurchase RTN at any time during the next six months, at a price set by a formula.

Luken Communications also purchased for $1.5 million warrants to buy 8.05 million shares of Equity Media for $1.10 per share through Sept. 7, 2009. Equity Media shares are currently trading at around 79 cents apiece. If Luken exercises, its ownership stake in Equity Media would increase from 20% to 30%. At 20%, Henry Luken is already the company’s largest shareholder.

Equity Media also announced Wednesday that it received $5 million installment payments for selling its TV stations that are affiliated with Univision and TeleFutura in six markets to Luken. They are in Amarillo and Waco, Texas; Fort Myers/Naples, Fla.; Minneapolis; and Oklahoma City and Tulsa, Okla., apparently as part of a previously announced transaction. The balance of $12.5 million is payable when regulatory and other approvals are received.

The company will use $17.5 million of proceeds to pay off a credit facility, the company said. A $38.5 million senior secured credit facility will still be outstanding after the transactions.

The company is also in talks with private-equity firm Thomas Weisel Partners exploring transactions that would benefit shareholder value.