Suit accuses b'caster of trying to undercut payout on shares
NEW YORK — The latest salvo in an ongoing tit-for-tat between NBC Universal and Paxson has the newly minted media conglom suing the broadcaster over how to calculate dividend payments on NBC’s preferred Pax stock.The suit, filed Thursday in Delaware Chancery Court, accuses Paxson of trying to undercut the payout on $415 million worth of preferred shares of Paxson that NBC bought in 1999. The investment represented a 32% stake in Paxson. The contract set the dividend at 8% but called for an adjustment, or “reset,” to market rates after five years — meaning this September — with terms set by an independent investment bank to be chosen by Paxson. NBC disputes Paxson’s methodology in determining the rate as well as the West Palm Beach, Fla.-based broadcaster’s definition of “independent” investment bank. NBC reps declined to comment. Paxson reps weren’t available. NBC has been receiving interest of about $33 million a year on the stock, a figure that could rise to well over $100 million with a “reset.” (The dividends aren’t cash, but are rolled back into the original investment.) The dividend spat, however, is a separate issue from the real problem plaguing the two companies: how to unwind their acrimonious partnership, which was billed five years ago as the start of a lucrative alliance for both sides. Last fall, NBC exercised an option that would force Pax to buy back the Peacock’s stake with interest for an estimated $550 million this November. The trouble is, loss-making, debt-laden Paxson is strapped for cash. Paxson indicated NBC could sell its stake to a third party — if anyone wanted it. Paxson itself had hired Bear Stearns and Citigroup to help it look for a suitor. NBC believes Paxson is ultimately responsible to come up with the dough.
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