The games major banks play.
As was mentioned previously, and from known fact, Citadel's stock is virtually bankrupt, but the stock, at nearly $.13 a share, is now growing from the depths of when it was a nickel a share or less. Not that it's a winner, of course, but it is growing.
As mentioned before, the corporate stock has nothing to do with its operating expense or profit -- which many of the Citadel stations have. Cash flow is good in many of their markets including San Francisco, Chicago, New York, Providence and in many others, as are other divisions, not including the ABC Radio Networks, but the music services, individual show syndications and more are doing quite well.
The "fear" of bankruptcy, and you sound like one wishing for it, will come if it does, as a "pre-packaged bankrupcy" which, for a short time, as in the case of Tribune, GM and other corporations that have lost its investor stock, but not its "institutional" investments, will mean a swap of equity (absolute holdings, licenses, operating funding, receivables, etc.) including the probable retainment of the "higher ups" -- like Farid Suleman.
Banks may well trade "debt for equity" to cover the $150-million covenenant, and, possibly, Citadel could sell a few small clusters or a major station or two to the likes of Bruce Reese at Bonneville or Larry Wilson at Alpha betweeen now and Jan. 15th. No big deal, really, CBS and Clear Channel have already shown how it's done.
Now, if that doesn't happen, the pre-packaged bankruptcy, meaning, everyone, including the investment bankers, know right to the penny what's going to happen. They assume control until the company comes through the pre-packaged bankruptcy with a new and worthwhile plan to alleviate more debt, which means cost cutting, selling the network(s) (maybe) or other opportunities.
If the SEC or even the FCC, because of "overlap" of investment banks taking on various debts of other broadcast groups in markets that also has Citadel stations, this may become a problem, but so far, the Commission isn't looking to turn off any Citadel radio stations because of debt, as they still operate and function day to day and are not going dark, like rumors had WLS doing so. Won't happen.
It's a squeeze play in progress. The banks just want their money, or an enforceable plan to get their money (hence, a pre-packaged bankruptcy,) and the 3rd quarter numbers reflect the same losses every other major group has endured. So, the banks don't want to write down $150-million or $2.7 billion for that matter, so, they'll play the game and Citadel will continue to operate, possibly with limited protection from creditors (including their banks,) until such a plan is revealed and instituted. The banks are in no position to say "no" to a reorganization, for they'll lose too much money.
On the other hand, they don't want to be like Bain-Lee and operate radio stations, that's not their job or their plan. Money is tight. They'd rather see the company survive or be sold off in pieces to a Bonneville, to eliminate the debt, instead of them (the banks) having to hold on to it as equity.
That's why a pre-packaged bankruptcy, if that, is in the works. The Jan. 15 date triggers a default, which Citadel has acknowledged, as you pointed out. It means that now, Goldman-Sachs, et al, have to decide how much it's worth to them to lose, or to save, by keeping Citadel out of the hands of creditors, or forcing sales in a still poor and struggling economy. That's a job best left to broadcasters, not banks -- and why Citadel would be best to keep those lines of communication open.
It's the usual share of regular investors who got the shaft, not the investment banks. They will save the stations, pre-packaged bankruptcy will save, on a short leash, Citadel as a corporate entity for about a year, maybe.
Again, this will not, in my opinion, be a Chapter 11 or Chapter 7 liquidation of Citadel Broadcasting. A sale of certain assets? Probably if not possibly. But a fire-sale? No.
An "admitted liklihood of bankruptcy"? What would you expect Citadel to say. They have few investors now, and those who remain have lost lots of money. But the stations keep paying bills, paying staff and talent, and unloading expenses (and talent) not needed to operate.
It's a game of "chicken." See who blinks first --- the company or the banks.
