WLS parent Citadel faces shareholder fight over reorganization
Citadel Broadcasting Corp., a Las Vegas-based owner of 224 radio stations, will face opposition from shareholders at tomorrow's hearing for approval of the disclosure statement explaining the reorganization plan.
In Chicago, Citadel owns WLS AM-890 and WLS FM-94.7.
Citadel, whose stations are in more than 50 markets, filed the plan on Feb. 3 to carry out agreements negotiated before the Chapter 11 filing on Dec. 20. In addition to extinguishing existing stock, the plan would reduce debt by $1.4 billion, while giving 90 percent of the new stock plus a new $762.5 million term loan to holders of $2.076 billion in secured debt.
The two shareholders, Virtus Capital LLC and Kenneth S. Grossman Pension Plan, contend a turnaround in the media business is in progress. They claim the plan "severely and misleadingly undervalues" the business and "short-changes" creditors and stockholders."
They say projections in the disclosure statement don't reflect the industry turnaround and omit "meaningful cost savings" that are already in place.
They also object to stock incentive bonuses where senior management could receive up to 10 percent of the reorganized company. At a proper valuation, the stockholders believe executives will take home between $135 million and $180 million in new stock. Even at the company's depressed values, they see managers receiving $82.5 million to $110 million in stock.
The objecting stockholders, who own 7 million shares between them, also warn that the conversion of debt to equity could run afoul of limitations on foreign ownership of media companies.
General unsecured creditors, including deficiency claims of the senior creditors, are to receive 10 percent of the new stock or 5 percent in cash. The cash distribution is capped at $2 million and will go first to the creditors with the smallest claims.
The disclosure statement explaining the plan says that the midpoint of distributable value of the reorganized company is $1.655 billion, including $72.2 million cash when the plan is projected to become effective.
The draft disclosure statement has blanks where secured and unsecured creditors later are to be told the percentage they can expect from the plan.
The projected income statement included in the disclosure materials shows Citadel with a $787 million net loss in 2009 on net revenue of $724 million. The loss includes $986 million in impairment charges.
This year's projected net income is $630 million, including a $565 million gain on forgiveness of debt. Projected net revenue this year is $721 million.
Citadel and subsidiaries listed assets of $1.4 billion against debt totaling $2.46 billion. Citadel is the third- largest radio station owner in the U.S., with 166 FM and 58 AM stations. The 24 stations in large markets were acquired in a June 2007 merger transaction with Walt Disney Co. where Disney shareholders received 57.5 percent of Citadel's stock and Disney received $1.35 billion cash.
The plan was negotiated before the Chapter 11 filing with holders of 60 percent of the senior debt.
Citadel also distributes programming to 4,000 stations.
The case is Citadel Broadcasting Corp., 09-17442, U.S. Bankruptcy Court, Southern District New York (Manhattan).