This Time Hallmark Gets A Gift


Hallmark Cards gave its TV unit a nice gift last week: Crown Media, whose U.S. Hallmark Channel is celebrating its second birthday got $400 million to help clear up a messy stock deal that could have become even more expensive.

The money was given to Crown Media, which needed the infusion to cover a bet it made two years ago when it sold $265 million worth of a complicated preferred stock.

The preferred stock deal carried a cash payout of 6.75%, but guaranteed investors would ultimately receive a return of at least 14%.

Back when Crown's stock traded at $12 a share, the presumption was that investors would want to convert the preferred stock into Crown common shares. Instead, Crown dropped below $2, before rebounding to $4.

To solve the problem, Crown's 70%-owner Hallmark Cards lent the company $400 million at an interest rate of 10.25% without requiring Crown to pay any cash interest for four years.