Las Vegas-based Citadel Broadcasting files for Chapter 11 bankruptcy

Citadel Broadcasting Corp., the nation's third-largest radio broadcasting company, filed for Chapter 11 bankruptcy protection Sunday in an effort to restructure its hefty debt load as it continues to face declining advertising revenue.

Las Vegas-based Citadel owns and operates 224 radio stations, including KABC-AM in Los Angeles, WLS-AM in Chicago, WABC-AM and WPLJ-FM in New York and KGO-AM in San Francisco. It owns four stations in Reno but none in Las Vegas. Its WABC is home to several syndicated hosts, including Don Imus, Rush Limbaugh, Joe Scarborough and Mark Levin.

In documents filed in U.S. Bankruptcy Court for the Southern District of New York, Citadel listed total assets on Oct. 30 of $1.4 billion and total debt of $2.46 billion. Citadel said in a statement that it has reached an agreement with more than 60 percent of its lenders on a deal that would erase about $1.4 billion of debt in exchange for control of the company.

"Our business will continue as usual and the company will work to emerge from the restructuring process as quickly as possible," CEO Farid Suleman said in a statement. Citadel has retained turnaround specialist Alvarez & Marsal North America LLC as its restructuring adviser.

Such deals usually wipe out shareholders completely. That hits private equity firm Forstmann Little & Co., which holds a nearly 29 percent stake, the hardest. Citadel's largest shareholder acquired a $2 billion stake in the company in January 2001 through a leveraged buyout. Documents show New York-based Forstmann Little owns about 76 million shares of Citadel's 265.8 million shares outstanding.

Forstmann Little could not be reached for comment Sunday.

Much of Citadel's debt burden stems from its $2.7 billion purchase of ABC Radio from Walt Disney Co. in 2007. Citadel also has been hurt over the past few years by declines in advertising revenue in nearly all major markets, as many listeners abandoned the format for prerecorded music and the commercial-free satellite radio offerings of Sirius XM. The economic slump further cut ad spending across all media, including newspapers and television, and also has affected rivals, including No. 1 U.S. radio broadcaster Clear Channel.

In May, Citadel hired a financial adviser to help it assess its options, including refinancing or restructuring its debt.

In documents filed with regulators in November, Citadel portrayed a gloomy picture in which it said revenue was expected to continue its decline through the end of 2009. The company said lower ad sales in its radio markets drove net revenue down more than 18 percent for the nine months ended Sept. 30 from the same period the year before. It warned that it expected to be unable to meet debt requirements by the middle of January 2010 because of current economic conditions and tight capital markets.

Neil Begley, a senior vice president at credit ratings agency Moody's Investors Service, cautioned in a Dec. 11 report that the economy, ad spending declines, rising debt and looming loan covenant requirements had left Citadel with an "unsustainable capital structure."