Hallmark 'Deadline' Just A Greeting

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Hallmark Cards may have partially built its empire on missives like "Thinking of You" and "Sorry I Forgot Your Birthday," but lawyers for the greeting card giant may have found a new niche - the "Sorry We Imposed that Non-Existent Deadline" card.

Hallmark Cards, the largest shareholder of Hallmark Channel parent Crown Media, has been waiting since May 28 for an answer from the programmer on whether to accept or deny a proposed $1.1 billion recapitalization program.

In securities filings in May, Hallmark Cards appeared to impose a deadline for receiving that answer: it wanted an answer before Crown files its next 10-Q second-quarter statement. That document is usually filed in late July or early August.

But in a letter to Crown attorneys on July 16 (filed at the Securities and Exchange Commission on July 17), Hallmark Cards attorney John F. Johnson wrote "that filing date was in no way intended as any sort of deadline."

The letter continues that Hallmark also understands that the special committee of independent directors assembled to review the proposal "need to take whatever amount of time it determines to be required to make what it and its advisors determine to be an appropriate response to our proposal."

Johnson said Hallmark also understood that while it believes Crown's refinancing options are limited - it has said that it believes Crown cannot pay the $1.1 billion owed it by May 10, 2010 - "we have assumed the special committee will explore other refinancing alternatives."

That may take a while. While Crown assembled a special committee of independent directors to evaluate the proposal shortly after it was received, the committee only hired an independent financial adviser (Morgan Stanley) on July 14.

Interestingly, the argument that Crown's special committee of independent directors would not have enough time to properly evaluate the Hallmark Cards proposal was a major complaint of Crown minority investor Sal Muoio prior to his filing a suit July 13 to try to block the deal. Muoio had stated in the past that Hallmark appeared to be threatening Crown with bankruptcy in order to push the recapitalization deal through.