Good post. The first thing they have to do is ride out the current situation. That means conserving as much as they can, hold the line on spending, because no one knows how long it will be before the banks will be lending again. The second thing is to find alternative sources for money besides traditional banks. The bad news is that, right now, they all come with huge interest rates. Sirius is paying 20% interest on the half billion it got from DirecTV. But once the situation clears up, they can renegotiate that rate to something more realistic.
Farid is cut from the same cloth as Karmazan. So he's looking for a white knight. Someone with cash who he can make a partnership deal with who can help him cover his short term debt problems. Karmazan made his with DirecTV. So you have to look at who might make a good partner.
How far can they cut? Down to zero. They own ABC Radio, which owns a bunch of 24/7 music formats based in Dallas.
http://www.abcradionetworks.com/article.asp?id=341457 These are the old Satellite Music Networks. They deliver radio formats to a few thousand stations already. So the structure is already in place for them to eliminate all local jocks. That's something even Clear Channel can't do.
Selling off assets is hard to do when no one has money. I heard a story that Larry Wilson (former Citadel CEO) was putting together a group of people to get back into station ownership. But let's face it. Even he will be faced with the same problems Farid has, and will have the same choices. None of them are good. Jerry Del Colliano thought that when Sam Zell got back in the game, he might bring a return to the old Jacor. He even hired back his old team. But even Zell wasn't able to save Tribune from the hole.
Back to delisting...yes their stock will be tradable OTC. But until their situation changes, it's price will stay where it is. There are lots of traders who enjoy 20% gains when a stock jumps a penny. Sirius solved their short term problem, and their stock is still at 16 cents. That's twice what it was, but they're no where near getting back on the NYSE. So this is a long term situation. But even blue chips like General Electric lost 80% of their value. Warren Buffett is apologizing to his clients. All the biggest geniuses in the world don't know what to do.
Chapter 11 wipes out everyone. And I'm not sure how the ABC/Morris Trust would be affected. Right now, that part of the package is also driving down Disney stock. He could bankrupt the subsidiary without bankrupting the parent company, thus preserving what's left of Citadel. I'd read that Mel was considering doing that with XM. I don't know what's in his contract with Disney regarding such a plan.
It's easy to run a successful company. Once everything is running, all you do is cash the checks. It's a lot harder to bring one back from the basement. Farid has the knowledge and connections to do it, once the economic environment starts to move. There aren't many other people who they could get who could do a better job at this point.
