Citadel Broadcasting is now officially bankrupt. The company filed a Chapter 11 petition for protection from creditors on Sunday with the US Bankruptcy Court for the Southern District of New York, saying it hoped for expedited processing so the company can emerge from Chapter 11 in less than 180 days.
As it filed the petition for protection from creditors while it reorganizes, Citadel said it already had support for a pre-packaged financial reorganization plan from most of its major creditors. The company said it had reached a deal with over 60% of its senior secured lenders on the terms of a plan that would extinguish approximately $1.4 billion of indebtedness.
The financial restructuring plan contemplates that Citadel’s $2.1 billion secured credit facility will be converted into a new term loan in the principal amount of $762.5 million. Holders of senior secured claims would receive a pro rata share of the new term loan and 90% of the new common stock in reorganized Citadel. The pre-negotiated restructuring further contemplates that holders of unsecured claims, including the secured lenders’ deficiency claim of approximately $900 million, Citadel’s unsecured notes and general unsecured claims will have the option to receive either a pro rata share of cash in an amount equal to 5% of the unsecured claim (capped at $2 million) or 10% of the new common stock, subject to dilution for distributions under reorganized Citadel’s management equity incentive program. Current shareholders would be left with nothing, as the plan would cancel all 265,759,192 outstanding shares of common stock. The reorganization plan proposes to have an equity incentive plan for Citadel management once the company emerges from Chapter 11.
“We are pleased with the support from the majority of our senior lenders, and we look forward to working with the remaining senior lenders and other stakeholders to ensure a complete and expeditious restructuring,” said Citadel CEO Farid Suleman, who is expected to continue in that role. “Our business will continue as usual and the company will work to emerge from the restructuring process as quickly as possible,” he added.
To fund its restructuring, Citadel said it has reached an agreement with its secured lenders to access more than $36 million of cash on hand, as well as all cash flow from operations, which it says will will be more than sufficient to fund operations during the restructuring process. Citadel also intends to seek customary relief from the Bankruptcy Court to ensure that operations continue without interruption, including authorization to continue paying employee wages and salaries, as well as honoring certain customer obligations and programs.
According to the Chapter 11 filing, JP Morgan Chase Bank, as agent for the senior lenders, is listed as the largest creditor. The exact amount, however, is listed as “unknown.” Wilmington Trust Company is listed as being owed $49.2 million and The Walt Disney Company $11.2 million. Citadel acquired the ABC Radio stations and network operations from Disney in 2006 in an all-stock deal valued at $2.7 billion. Citadel Media, the former ABC Radio Networks, continues to distribute ABC News Radio in a deal with Disney.
Also on the creditor’s list: ASCAP and BMI are each owed over $1 million, former ABC/Citadel executive Mitch Dolan just shy of a million, SoundExchange $136K, the RAB just under $60K, the LA Dodgers $35K, Coleman Research $35K, DMR $27K, the New York Yankees nearly $23K and Katz Media Group nearly $20K.
As of the end of Q3, Citadel reported senior debt of $2.056 billion and total liabilities of $2.479 billion. It owns and operates 224 radio stations and distributes network programming to more than 4,000 stations.
RBR-TVBR observation: It has been painful to watch this slow-motion train wreck develop over the years. What is most sad is that the architect of this disaster will remain in place to likely run the company into the ground a second time. The employees of Citadel and the communities its stations serve deserve better.