RBB05 said:
I think Oaktree has some very logical points about the financials and the feasibility of dumping the networks, but then that begs the question, will the cost savings be reflected in time to do them any good? The clock is ticking quickly and Jan 15 is right around the corner and based on their Friday report, they are not anywhere close to meeting the debt covenant terms. That $150 million is the 8,000 pound gorilla in the room.
I have no skin in the game. I have never worked for Larry or Farid or Citadel.....but as a veteran of the industry, I think what Farid has done to Citadel is shameful. The answers for LA are not that hard, but it is one dramatic misstep after another.
While there is a lot of posturing going on by many, clearly some people will have an easier time raising the funds to buy Citadel.
I think that because it is a fluid situation there are still a few wildcards to be thrown into the game in the late moments.
Thank you RBB05 and others. The point is that this is a liquid situation that changes day-to-day. The small gains Citadel has made on the Stock Market give them a very very slight advantage -- but one that might help their lenders, Forstmann-Little and the Disney investors, in deciding not to dump the debt for a loss to them, as the company either re-organizes, re-packages its debt or sells in whole or in part (or, in divisions, as someone previously mentioned.)
The investment banks hold the cards -- and the debt. Citadel has, still, great asset value in its stations, but not in paying its debt.
The idea that no one wants to buy the network is not true. Yes, there are those nasty expenses and debts in a bad economy, a syndication arm that is being re-formulated to cut expenses and anything to make a deal more attractive to a potential buyer. There are those who could surprise that could step up to the plate and buy it -- even under the current name. It has happened to Westwood One, is happening to NBC-TV, Dial Global/Jones, Clear Channel/Premier (which already owns 40% of the satellite distribution of ABC Radio) and others; both public and private.
And, again, they must tread carefully, as David mentioned, to not further screw the investors of the Disney / Morris Trust or Forstmann-Little.
And if it happens, reorganization in bankruptcy does not mean the stations are in danger of going dark. Far from it.
The worst thing, actually, is that the investment bankers keep current management (Farid Suleman and Judy Ellis, among others) in charge with their feet to the fire. This is common, as in the case of Mapleton Communications and others. Why? Because banks don't run radio stations nor want to own them. But, they need people to run them from the top. In their eyes, as in the case with Clear Channel (minus Randall Mays) they don't make changes from those who have the keys to the gold chest -- or at least think so.
Bankers don't want to lose money. And $2.7 billion now whittled to $800-million doesn't help. They want to stop the bleeding because if someone bought it -- they'd still have debt to pay off. That comes from the true asset value, not because of a fire sale.
The liquidity: While the Stock Market closed with the biggest gains in a year today, over 10,000 -- Citadel went from $.12 a share to under $.06, as "preparation for bankruptcy" word got out today. Unexpected? No ... not from a company that was doing $.03 a share two months ago. They are putting fear into the banks, because that's the pressure they need to do to stay afloat.
If the Board of Directors were to suddenly terminate Suleman and Company (if it could, which is unlikely,) the question would be, who from the outside would be ready to run it -- and do so by Jan. 15. Interesting to watch.
Bankruptcy is a protection from creditors (or investment bankers) -- not a shutdown procedure. The banks may, in fact, be forcing Citadel into bankruptcy to cool things off and to "reorganize."
