Back in early July, amongst warnings to employees about not be able to buy Citadel stock or to divest stock from its 401k accounts, Citadel hired Lazard Freres as financial advisors to look into Chapter 11 bankruptcy or "alternative options" which are still being considered by other financial advisors as "an option."
To protect its assets,a company such as Citadel could, as last resort, file for Chapter 11 bankruptcy by advise of its investment institution(s) to avoid hitting the "default" trip wire, which, in this is case, is Jan. 15. If it did claim bankruptcy, the investment banks would get pennies on the dollar -- which they don't want to do, as Citadel can still sell the assets at whatever price it can get. It does not mean "bargain" prices -- just that the banks will eat a lot of their money, just like investors have.
The game continues. There was no "admission of bankruptcy" during the 3rd quarter conference call, but a heightened awareness that an "option" was being considered, as the company would not, from all appearances, meet its $150-million covenant call on January 15th, thus starting a default -- not the first time similar circumstances have been done to broadcasters (namely, Clear Channel,) this year.
Banks will weigh the consequences to them in saving the company before taking huge losses, especially if it appears the economy is turning.
I believe that a pre-packaged bankruptcy aggreeable to both Citadel's near future and to the banks -- to save equity, is in the works. The same would have been true of Sirius/XM had a half-billion dollars in a debt-for-equity deal with John Malone and Liberty Media not taken place. The same or similar could happen with Citadel, as could a buyout in whole or in part.
