Citadel Broadcasting files for Chapter 11

— 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 in all major markets and produces news and talk-radio programing for 4,000 station affiliates and 8,500 program affiliates. 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 as of Oct. 30 at $1.4 billion and total debt of $2.46 billion. The company 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 forcontrol of the company, Citadel said in a statement.

“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. - which 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 265.8million shares outstanding.

Representatives of Forstmann Little could not be reached for comment Sunday afternoon.

Much of the Citadel’s debtburden 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.

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.

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 will get a share of the new loan and 90 percent of the new common stock in the reorganized company.

Holders of unsecured claims and other creditors may choose to receive 5 percent of their claim in cash, up to $2 million, or 10 percent of their claim in the form of new stock. Creditors of some of its largest unsecured claims are: JPMorganChase Bank NA, whose claim was listed in the filing as “unknown,” Wilmington Trust Co. with a $49.2 million claim and The Walt Disney Co. with an $11.2 million claim.

Citadel’s remaining common stock is owned by 1.1 million shareholders, bankruptcy documents said, including a 3 percent stake held by CEO Suleman. The stock, which traded in the $10-range in 2007, has steadily declined in the past two years, falling as low as a penny earlier this month.

Kirkland & Ellis LLP is acting as general bankruptcy counsel, and Lazard Freres & Co. LLC is acting as financial adviser.

Front Section, Pages 3 on 12/21/2009

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