Settlement with bond holders may nix Citadel dividend


Citadel Broadcasting hasn’t paid a dividend to shareholders since its special dividend just before the merger acquisition of ABC Radio from Disney. There had been expectations that Citadel would resume quarterly dividend payments this year, but that may not happen due to the settlement that the company has reached with bondholders who’d been fighting in court over whether Citadel had to immediately pay off its bonds because of the ABC deal.

After looking over the terms of the proposed settlement, Bear Stearns analyst Vic Miller told clients not to expect any dividend payment from Citadel this year. “Under the terms, CDL will redeem $55MM face value of the converts for $49.5MM in cash (90%). Interest on the notes will rise to 4%. CDL, with cash on hand (estimated $63MM at YE 2007), 2008 FCF (estimated at $150MM) and asset sales, needs to reduce the converts to less than $165MM by YE or face a 2% retroactive interest rate hike for 2008 and a post 1/1/09 interest rate increase that will bring CDL converts to par (estimated at 12.5% now). CDL can also make open market purchases of the converts. In 2008, expect CDL to focus on debt reduction not paying dividends,” Miller concluded.