The PAX network is all about wholesome family entertainment, but parent Paxson Communications' (AMEX:PAX) story would better suit a final season of Newlyweds, in which Jessica and Nick hire divorce attorneys.
Last week, NBC, which is owned by General Electric (NYSE:GE), decided to unwind its 32% investment in Paxson.
This should've not been a revelation. Over the years, Paxson's relationship with NBC would hardly have earned a "G" rating. Paxson petitioned regulators to block NBC's acquisition of Telumundo. Oh, and Paxson went to arbitration and lost against NBC on a claim of breach of contract.
Last year, Chairman and founder Lowell "Bud" Paxson hired Bear Stearns to seek strategic alternatives (business-speak for "selling out"). Nothing came of it. Although, Mr. Paxson believes that NBC's exit would bring suitors to the table.
Perhaps Mr. Paxson has watched a bit too much Little House on the Prairie. Redeeming the NBC investment will cost Paxson about $550 million. The problem? Paxson has only $100.1 million in the bank and a debt load of $919.2 million.
Yet, Mr. Paxson claims there will be no liquidity problem since redemption will not be required. Brandon Burgess, executive vice president of business development at NBC, begs to differ. According to him: "We have the right to be repaid and they have one year to repay us. If not, they will be in default."
In fact, Burgess goes on to bash Paxson, saying that the company "has become so under-managed and its business plan isn't working." This is not exactly the kind of language a prospective buyer wants to hear.
Mr. Paxson once said that a calling from God prompted the creation of his company. He may be in need of another call.
Think Paxson will pay up or will GE play hardball? Talk it over on our General Electric discussion board. Or take it up with Tom Taulli himself at [email protected] .
