Citadel shareholder denies it violated bankruptcy court order


Aurelius Capital Management and its related companies have now filed a response to Citadel Broadcasting’s motion to force Aurelius to sell its Citadel stock. Aurelius says it was well aware of the bankruptcy court’s order regarding “substantial shareholders” and did not violate it.

In the joint response filed with the US Bankruptcy Court, the Aurelius entities say the 16.7 million shares of Citadel that they acquired are owned by three distinct fund entities – Aurelius Capital Partners LP, Aurelius Capital Master Ltd. and Aurelius Convergence Master Ltd. – “which invest three distinct pools of capital.” None of the three owns more than 11.96 million shares, which was the trigger level set by the bankruptcy court for a would-be stock buyer to provide the court with advance notice of its intent to become a “substantial shareholder.”

“This is no accident,” the filing by the Aurelius entities noted. They say they were well aware of the order and obtained “sophisticated legal advice” about the order before beginning their stock buying. In fact, they noted, they even consulted Citadel’s bankruptcy counsel about the meaning of the order.

The fact that all three investment funds are advised by Mark Brodsky’s Aurelius Capital Management does not make them a group, since each makes its own investment decisions, the filing said. In fact, it noted, the three shareholders specifically disavowed forming a group when they reported their collective ownership of more than 5% of Citadel’s stock in an SEC filing.

Since acquiring their Citadel shares, the Aurelius entities have asked US Bankruptcy Judge Burton Lifland to reject Citadel’s Chapter 11 reorganization plan, which Aurelius claims illegally overpays the company’s senior creditors while shortchanging junior creditors and shareholders.