Citadel Broadcasting Corp., the nation's third-largest radio broadcasting company, filed for Chapter 11 bankruptcy protection Sunday in an effort to restructure its hefty debt load as it continues to face declining advertising revenue.
Citadel owns and operates 224 radio stations, including five radio stations in Columbia - WIS 1320 AM, KISS 103.1 FM, WNKT 107.5 FM, Magic 98.5 FM, B106.7 FM - and four others in Charleston.
The company also operates KABC-AM in Los Angeles, WLS-AM in Chicago, WABC-AM and WPLJ-FM in New York and KGO-AM in San Francisco. Citadel's WABC is home to several syndicated hosts, including Don Imus, Rush Limbaugh, Joe Scarborough and Mark Levin.
In documents filed in U.S. Bankruptcy Court for the Southern District of New York, Las Vegas-based Citadel listed total assets at Oct. 30 of $1.4 billion and total debt of $2.46 billion. The company said in a statement it has reached an agreement with more than 60 percent of its lenders on a deal that would erase about $1.4 billion of debt in exchange for control of the company.
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"Our business will continue as usual, and the company will work to emerge from the restructuring process as quickly as possible," CEO Farid Suleman said in a statement. Citadel has retained turnaround specialist Alvarez & Marsal North America LLC as its restructuring adviser.
Such deals usually wipe out shareholders completely. That hits private equity firm Forstmann Little & Co. - who holds a nearly 29 percent stake - the hardest. The company's largest shareholder acquired a $2 billion stake in Citadel in January 2001 through a leveraged buyout. Documents show New York-based Forstmann Little currently owns about 76 million shares of Citadel's 265.8 million shares outstanding.
Forstmann Little could not be reached for comment Sunday.
Much of Citadel's debt burden stems from its $2.7 billion purchase of ABC Radio from Walt Disney Co. in 2007.
Citadel also has been hurt over the past couple of years by declines in advertising revenue in nearly all major markets as many listeners abandoned the format for prerecorded music and the commercial-free satellite radio offerings of Sirius XM.
The economic slump further cut ad spending across all media, including newspapers and television, and has also affected rivals including No. 1 U.S. radio broadcaster Clear Channel.
In May, Citadel hired a financial adviser to help it assess its options, including refinancing or restructuring its debt.
In documents filed with regulators in November, Citadel portrayed a gloomy picture in which it said revenue was expected to continue its decline through the end of 2009. The company said lower ad sales in its radio markets drove net revenue down more than 18 percent for the nine months ended Sept. 30 from the same period the year before. It warned it expected to be unable to meet debt requirements by the middle of January 2010 because of current economic conditions and tight capital markets.
Neil Begley, a senior vice president at credit ratings agency Moody's Investors Service, also cautioned in a Dec. 11 report that the economy, ad spending declines, rising debt and looming loan covenant requirements had left Citadel with an "unsustainable capital structure."
Under terms of its bankruptcy reorganization, the company said its $2.1 billion in secured credit will be converted to a new term loan of just $762.5 million. Those secured creditors, led by JPMorgan Chase Bank, will get a share of the new loan and control of 90 percent of the new common stock in the reorganized company.