The Wall Street Journal reports that Citadel Broadcasting Corp., the third-largest radio broadcaster in the U.S., plans to file for bankruptcy as soon as today (Sunday) according to people familiar with the matter.
Citadel is expected to file in a deal supported by many lenders collectively owed $2 billion, known as a “prearranged” deal in bankruptcy parlance. These lenders plan to swap a big portion of their debt for equity in a reorganized Citadel, effectively handing them control.
The deal would reduce Citadel’s debt load to about $762.5 million, the people said. The company will need to solicit more creditor support in court to get its reorganization plan approved by a judge. Citadel’s board approved the filing in recent days.
Citadel Chief Executive Farid Suleman is likely to remain at the helm once the company emerges from Chapter 11 protection, people familiar with the situation said. Citadel representatives didn't respond to requests for comment..
Citadel’s fall is emblematic of the troubles ravaging radio broadcasters, which took on loads of debt during boom times and now face a harsh advertising climate.
Citadel loaded up on debt to finance its acquisition of Walt Disney Co.'s ABC Radio stations in 2006. At the time, radio was a $20 billion a year industry. But 2006 turned out to be a peak. Mr. Suleman has said he would have “sold, not bought” had he known where the economy was heading.
Other radio companies face similar struggles. Clear Channel Communications Inc. took on more than $17 billion to go private last year and just refinanced some debt. Emmis Communications Corp. has had to get amendments on debt agreements twice this year and Regent Communications Inc. fell into technical default earlier this year after auditors questioned whether it could avoid bankruptcy.
In recent months, Citadel hired law firm at Kirkland & Ellis LLP and investment bank Lazard Ltd. for restructuring advice.
