Courtesy New York Times

(December 21, 2009) The Citadel Broadcasting Corporation, one of the nation’s largest radio broadcasters, filed for bankruptcy in New York on Sunday after agreeing to turn over control of the company to its creditors in exchange for reducing its debt.

The filing by the company, which owns 224 stations across the country and syndicates Don Imus’s radio show, was not unexpected but does reflect the troubles plaguing the radio industry amid steep declines in advertising revenue and big debt loads.

For now, some media companies facing debt problems have been able to buy themselves some time by refinancing as the capital markets recover. Clear Channel Communications, Citadel’s biggest rival, sold $2.5 billion in bonds last week through its Clear Channel Outdoor affiliate, which will go toward paying down some of its debt. But many others are still trying to find ways to address their shrinking revenues.

Citadel chose to address its debt burden by filing for what is known as a prearranged bankruptcy, in which a company secures the consent of a wide swath of its creditors. The broadcaster said Sunday that its Chapter 11 filing was supported by more than 60 percent of its lenders.

“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,” Farid Suleman, Citadel’s chief executive, said in a statement. “Our business will continue as usual and the company will work to emerge from the restructuring process as quickly as possible.”

Under the terms of Citadel’s agreement with its creditors, the company will reduce its $2.1 billion of loans to $762.5 million in exchange for its secured lenders owning 90 percent of the reorganized broadcaster’s equity. Its bondholders will receive the bulk of the remaining equity.

In its bankruptcy petition, Citadel listed $1.4 billion in assets and $2.5 billion in debts. Its largest unsecured creditors include JPMorgan Chase, which holds an unknown amount of debt; the Wilmington Trust Company, which oversees $49.1 million worth of bonds; and the Walt Disney Company, which holds $11.2 million worth of claims.

The company’s largest stakeholder is the investment firm Forstmann Little, which owns a 28.7 percent stake.

Citadel, which is based in Las Vegas, also distributes news and talk radio programming to stations, including “The Mark Levin Show” and “The Huckabee Report.”

The troubles of Citadel have been well documented. Citadel took on billions of dollars in debt in 2006 to finance its purchase of Disney’s ABC Radio stations. But in the years that followed the deal, its revenues have plummeted as advertising dried up.

In a regulatory filing last month, Citadel reported a 14 percent drop in revenue to $183.8 million, and a 16 percent drop in operating income to about $38 million. The company also warned then that it would most likely breach certain financial covenants early next year.

Citadel hired the investment bank Lazard and the law firm Kirkland & Ellis earlier this year to negotiate with the company’s creditors, but the talks were contentious at times.

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