Citadel Broadcasting Arranging to Hand Control to Its Lenders

Citadel Broadcasting Corp., the third-largest radio broadcaster in the U.S., is preparing to file for bankruptcy by the end of the year, according to people familiar with the matter. Citadel's long-expected move is yet another reminder of the travails facing media companies, which are up against stiff competition and shifts in consumer habits. Advertising revenues have plunged for newspapers, radio broadcasters and television stations. Under the deal presented to lenders this week, Citadel would file a "prearranged" Chapter 11 bankruptcy plan supported by many creditors. Lenders owed $2 billion would swap a substantial amount of that debt for around 99.5% of the equity in a reorganized company, these people said. The restructuring would give the group of some 90 lenders control of Citadel. Current shareholders, as in most bankruptcies, would be wiped out. Citadel landed in trouble after loading up on debt to fund its acquisition of Walt Disney Co.'s ABC Radio stations in 2006. At the time, radio was a $20 billion-a-year industry. The ABC stations, chiefly in large cities compared to the medium-sized markets in which Citadel specialized, offered the company a chance to vault onto a much bigger playing field. But 2006 turned out to be the peak, leaving Citadel saddled with debt in a business that began shrinking rapidly.