Three more media companies, including broadcaster Citadel Broadcasting, have filed for bankruptcy, brought low by the drop in advertising revenue and crushing debt loads.
Citadel, the third-largest U.S. radio broadcaster filed for Chapter 11 bankruptcy protection in Manhattan on Sunday, hurt by $2.08 billion in debt and a decline in advertising by auto, banking and restaurant companies.
Broadcaster NextMedia Group Inc. and newspaper publisher Heartland Publications Inc. followed Citadel into bankruptcy court on Monday.
The latest filings come in a rough year for media in which magazine publisher Reader's Digest Association Inc., broadcast company ION Media Networks Inc. and newspaper group Sun-Times Media Group also filed for bankruptcy.
On Monday, ION said it had emerged from bankruptcy after eliminating $2.7 billion in debt and preferred stock claims.
"Media is being hammered by the impact of the both the economic downturn and the pressure posed by the Internet," said D.J. (Jan) Baker, co-head of the bankruptcy practice at Latham & Watkins. Baker has advised media companies on restructuring but is not working on Citadel, NextMedia or Heartland.
"A lot of these companies took on significant debt loads just at the time the profitability and revenue numbers for media were at their peak."
All three companies filed so-called prearranged bankruptcies in which they reached agreements with major lenders to restructure debt before filing. Prearranged bankruptcies are often seen as preferable to free-fall bankruptcies as they can be quicker, less disruptive and less expensive.
"Lenders appear to have made a decision that the loans are not likely to become performing again for the foreseeable future, if ever, and the only reasonable alternative is to de-leverage a large amount of debt into equity and hope that in so doing the balance sheet has been fixed," said Baker.
Citadel, which owns and operates 224 radio stations, reached a deal with more than 60 percent of its senior lenders to convert its secured credit facility into a new term loan of $762.5 million.
The deal, subject to bankruptcy court approval, would erase about $1.4 billion of debt.
Citadel, which broadcasts the Don Imus "Imus in the Morning" show with ABC Radio Networks, said in court documents that shareholders will be wiped out.
As part of the arrangement, senior lenders would also receive 90 percent of new common stock in reorganized Citadel.
The company's "business will continue as usual," said Chief Executive Officer Farid Suleman in a statement.
Las Vegas-based Citadel listed total assets of $1.4 billion and debts of $2.5 billion. Buyout firm Forstmann Little & Co holds 28.7 percent of the company's shares, according to court documents.
NextMedia filed for bankruptcy in Delaware with a prearranged plan that will hand over control of the U.S. radio station operator and outdoor advertising company to certain creditors.
First-lien debt and general unsecured claims will be paid in full, while second-lien debt will be converted into 95 percent equity in the reorganized company, according to an affidavit filed with the court.
The operator of 36 AM and FM radio stations listed total debt of $100 million to $500 million.
Greenwood Village, Colorado-based NextMedia also said its second-lien lenders had agreed to provide debtor-in-possession financing of $20 million to continue operations while in bankruptcy.
In a statement on its website, NextMedia said the reorganization process will have no impact on day-to-day operations and will not result in any changes to senior management or any reduction to employee headcount.
Following the reorganization, the company expects to have total debt of about $128 million.
U.S. newspaper publisher Heartland Publications LLC filed for Chapter 11 bankruptcy in Delaware, citing a decline in advertising revenue and growing competition from Internet-based alternatives.
The Clinton, Connecticut, company, which owns about 50 small newspapers in towns such as Gallipolis, Ohio, and Harlan, Kentucky, said it reached agreement with most of its secured first-lien lenders, led by GE Capital, on a restructuring plan that will cut debt by more than half.
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