Citadel Broadcasting to File for Bankruptcy

By MIKE SPECTOR and SARAH MCBRIDE Citadel Broadcasting Corp., the third-largest radio broadcaster in the U.S., filed for bankruptcy in New York on Sunday. Citadel, which owns and operates 224 stations across the country, listed debt of more than $2.4 billion and assets of about $1.4 billion. As of Sunday morning, only Citadel's voluntary petition had been filed with the bankruptcy court. Citadel is expected to file a deal supported by lenders collectively owed $2 billion, known as a "prearranged" deal in bankruptcy parlance. These lenders plan to swap a big portion of their debt for equity in a reorganized Citadel, effectively handing them control. The deal would reduce Citadel's debt load to about $762.5 million, people familiar with the matter said. The company will need to solicit more creditor support in court to get its reorganization plan approved by a judge. Citadel's board approved the filing in recent days. A Citadel spokesman declined to comment. The filing is a blow to private-equity firm Forstmann Little & Co., which owns 28.7% of Citadel, according to the company's bankruptcy filing. A person familiar with the investment said the firm had invested $1.5 billion in Citadel but sold off a substantial portion of the stake over the years, leaving an exposure of about $250 million. Citadel Chief Executive Farid Suleman is likely to remain at the helm once the company emerges from Chapter 11 protection, the people familiar with the situation said. Mr. Suleman could not be reached for comment. Citadel's fall is emblematic of the troubles ravaging radio broadcasters, which took on loads of debt during boom times and now face a harsh advertising climate. Citadel loaded up on debt to finance its acquisition of Walt Disney Co.'s ABC Radio stations in 2006. At the time, radio was a $20 billion a year industry. But 2006 turned out to be a peak. Mr. Suleman has said he would have "sold, not bought" had he known where the economy was heading. Other radio companies face similar struggles. Clear Channel Communications Inc. took on more than $17 billion to go private last year and just refinanced some debt. Emmis Communications Corp. has had to get amendments on debt agreements twice this year and Regent Communications Inc. fell into technical default earlier this year after auditors questioned whether it could avoid bankruptcy. In recent months, Citadel hired law firm at Kirkland & Ellis LLP and investment bank Lazard Ltd. for restructuring advice. Write to Mike Spector at mike.spector@wsj.com and Sarah McBride at sarah.mcbride@wsj.com