Hallmark 'Puts’ Stock Question to Rest

1/04/2008 7:00 PM Eastern

Crown Media Holdings, which owns and operates Hallmark Channel, last week reached a settlement with the National Interfaith Cable Coalition, which has agreed not to exercise its put option for more than 4 million shares of Crown stock valued at roughly $25 million.

The settlement between Crown and the NICC, one of Hallmark’s investors and programming partners, relates to an expired program production and broadcast deal and outstanding claims regarding the NICC’s equity interest in Crown Media.

According to an 8-K filing with the Securities and Exchange Commission last Thursday, Crown also said it had settled a pending $15 million NICC claim in the event of a change of control. Crown will pay the coalition a total of $3.75 million in three installments of $1.25 million each on Jan. 20, 2008, Jan. 20, 2009, and Jan. 20, 2010. If there is a change of control, Crown will pay the remaining unpaid installments at that time.

NICC held a put option to compel Crown Media to purchase its 4.3 million shares of Crown Media common stock, but under the settlement has agreed to relinquish this right as well as its seat on the programmer’s board.

Under the settlement, Hallmark Channel will continue to broadcast a Sunday morning block of faith and values programming provided by the NICC, but that block will shrink to two hours from its current six hours.

In addition, as of Jan. 1, Hallmark Channel regained control of five hours of daily programming each week formerly occupied by the faith and values program New Morning, from 7 a.m. to 8 a.m. Monday through Friday.

In late October, the NICC informed Crown Media that it planned to exercise its put option, which was due to expire Nov. 1.

Hallmark Channel is still trying to craft contract renewals with DirecTV, Cablevision Systems and Time Warner Cable, whose deals expired Dec. 31. (See “5:4,” page 39.)

“Negotiations are going well,” Hallmark Channel senior vice president of corporate communications Nancy Carr said last week. “We are optimistic we will reach an agreement.”