Under the terms of its Chapter 11 reorganization, Citadel Broadcasting was required to register the new stock being distributed to its creditors as soon as possible for public trading. That’s now been done, so we wait for the stock to begin trading.
The registration statement filed with the SEC on Monday covers 100 million shares of Class A Common Stock, 100 million shares of Class B Common Stock and 50 million shares of preferred stock. A lot of that is just planning for the future. Not nearly that many shares are being issued. In fact, no preferred shares are being issued now, but the company anticipates doing so at some point in the future.
Only the Class A stock is going to be publicly traded at this point. The financial reorganization plan requires Citadel to register it for trading on either the New York Stock Exchange or Nasdaq as soon as possible, but there’s been no exchange announcement yet, so we don’t yet know what ticker symbol will be used.
Under the reorg plan, Citadel is distributing three types of securities to its former debt holders, giving them flexibility regarding regulatory attribution and foreign ownership rules. Only three million shares of Class A stock with regular voting rights are being issued immediately. Also being distributed are 16.6 million shares of Class B stock, with limited voting rights, and 25.4 million warrants. The warrants are rather unusual because the conversion price is zero – the holders may simply exchange them for Class A shares at will. The Class B shares are also convertible to Class A, so effectively 45 million shares of Class A shares will be available for public trading as the holders elect to put them on the market. Another 5.1 million Class A shares have been reserved for future issuance to employees under Citadel’s Equity Incentive Program.
So, what are the new shares going to be worth? A quick back of the napkin calculation shows that, using the $2.04 billion valuation that the bankruptcy court accepted for Citadel and subtracting the $762.5 million of new debt remaining after the reorg, each of the 45 million shares would have a theoretical value a bit north of 28 bucks.
RBR-TVBR observation: Buyer beware! The new shares of CC Media Holdings, the parent company of Clear Channel Communications following its leveraged buyout, traded for a lot less than their theoretical value immediately after closing. It will be interesting to see what price the market places on the new Citadel shares, but don’t you dare use our calculation as investment advice!