WLS-parent Citadel: Aurelius violated stock purchase limits

Citadel Broadcasting Corp. filed a motion in bankruptcy court saying that affiliates of Aurelius Capital Management LP bought 16.7 million shares, in the process violating a court order prohibiting anyone from acquiring more than 12 million shares without permission from the company.

Citadel, a Las Vegas-based owner of 224 radio stations, filed a prepackaged Chapter 11 petition in January. In Chicago, Citadel owns WLS AM-890 and WLS FM-94.7.

As companies often do, Citadel immediately had the bankruptcy court enter an order prohibiting the acquisition of large blocks of stock that would result in a change of control, and in the process cause the possible loss of tax-loss carryforwards.

In its April 16 emergency motion, Citadel says that Aurelius violated the order on acquiring more than 12 million shares. Citadel wants the bankruptcy court to declare that the stock purchases were void from the outset. The bankruptcy court also should compel Aurelius to sell the stock within 15 trading days, Citadel says.

Should Aurelius sell any stock for a price in excess of the basis, it should donate the profit to a charity, according to the motion.

The confirmation hearing for approval of Citadel's plan is set for May 12.

Citadel, which operates in more than 50 markets, filed the original version of the plan on Feb. 3 to carry out an agreement negotiated before the Chapter 11 filing in December. The secured lenders and the creditors' committee support the plan following a settlement improving treatment of unsecured creditors.

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, and distributes programming to 4,000 stations.

The case is Citadel Broadcasting Corp., 09-17442, U.S. Bankruptcy Court, Southern District of New York (Manhattan).