Bankruptcy now an admitted liklihood for Citadel

[Element9]

The Wall Street Journal on line reported Saturday (12/19/09) that Citadel may file for bankruptcy "by Sunday." Taylor On Radio, in the December 18th edition, offered "As for the equity that used to be behind Citadel – one dealmaker says “What equity? It’s pretty much all gone, and Ted Forstmann is pretty much out of things.” Forstmann Little bought Citadel from Larry Wilson’s control and later added 23 big-market stations and the ABC Radio Networks operation from Disney. What equity, indeed.

 

[TheBigA]

That's an interesting quote, and it inspires a few more questions. Did Ted simply reach the breaking point on this and wasn't going to throw any more good money after bad? If so, what caused that situation? When the guy who controls 23% of your company shuts off the spiggot, that's a problem. The difference now between the companies that are operating normally and the ones in trouble is having a steady source of money to act as a backstop. Cash flow isn't enough right now. That obviously dried up at Citadel, and that's why they're in this situation. They could have used stock as equity, but when the value there collapsed last year, the only thing left was the properties themselves. And with no credit available, there's really no value there either. The lenders are the only ones left.

 

[TheBigA]

The Wall Street Journal just updated its story to say that it's official. Citadel made its voluntary filing Sunday morning.

 

[ercjncpr]

The Wall Street Journal just updated its story to say that it's official. Citadel made its voluntary filing Sunday morning.

http://www.reuters.com/article/idUSTRE5BI26A20091221

 

[Element9]

Taylor On Radio reveals the corporate dirt as word leaks from behind courtroom doors and filings. Former WABC New York manager Mitch Dolan is listed as one of the creditors owed nearly a million dollars:

After Citadel took over the 23 ABC stations, Suleman kept Dolan in place as its “Major Market Group” head, reporting to him. But Mitch alleges a number of actions by Suleman that undercut him, such as replacing Los Angeles market manager John Davison in January 2009 with Farid’s friend Bob Moore. Dolan says that was done without consulting him. And further, that Suleman agreed to pay Moore the same salary Dolan was getting, even though Moore reported to Dolan. (Former ABC exec John Hare testified at the August arbitration hearing that Moore’s pay package was, in the arbitrator’s words, excessive and unprecedented.) Dolan complained that in the Summer of 2008, Suleman replaced the director of sales in L.A. without consulting either him or Davison. Also that Farid offered the GM job at WPLJ (right around the corner at WABC) to somebody without checking. And Dolan says Suleman hired a friend to run a station in Dallas – and had him reporting directly to Suleman. Former WPLJ programmer Tom Cuddy circulated the arbitrator’s decisions to some of the radio trades, because he wants to set the record straight about his former boss, Dolan. Cuddy says one trade (not T-R-I) wrote that Dolan had been dismissed in February for budget reasons. After Mitch left he filed to get his severance of $850,000 plus 9% interest – which is presumably the bulk of the $917,000 he now claims as a creditor in Citadel’s bankruptcy. Ex-employees are at real risk of becoming creditors, in the Chapter 11 stories that are yet to be written.

Citadel's obligation to honor contracts of present and former air talent and managers is of particular concern. In many cases a company that goes through bankruptcy is not obligated to honor pre-existing contracts. Much if this is decided by the courts charged with overseeing the bankruptcy filing. As an example, published reports indicate that immediately after filing for Chapter 11 protection, Citadel Media entered into a new contractual agreement representing a number of its program providers such as ABC News.

Some Citadel employees have already adopted corporate think, "nothing will change and it's business as usual." Certainly, a positive attitude in matters such as these is commendable, yet it's more likely that once bankruptcy is approved the banks will exert their control of Citadel with more pressure than has ever been applied.

The status quo may in fact be maintained if the economy doesn't founder in 2010, but the first quarter is especially harsh in radio and media in general.

 

[socalguy]

An obvious question comes to mind after reading the above...does this intimate that Bobby Moore is one of, if not THE highest paid market manager in Radio?