Recently one of the largest radio broadcasting companies in the nation, Citadel Broadcasting, entered into bankruptcy proceedings. Now it appears as if there may be other media giants following in Citadel’s footsteps with NextMedia Group and Heartland Publications looking to file for bankruptcy as well.
This has been a bad year for media organizations all around. Earlier this year the well known Reader’s Digest Association filed as well as television broadcaster ION Media Networks and the Sun-Times Media Group (a newspaper company). So far, only ION has announced that it will be coming out from bankruptcy; this after they managed to get rid of nearly $3 billion (2.7) of preferred stock and debt.
Not only has the current poor economy made life difficult for the media, but having to compete with the internet has made things hard as well. Many of these companies also took on a large amount of debt right before things began to get bad. Such was definitely the case with Citadel as it took on a rather large amount of debt in order to purchase the Walt Disney Company’s ABC radio station (but not ESPN or Radio Disney) back in 2006.
Like Citadel, both NextMedia and Heartland have filed prearranged bankruptcies meaning that the already had come to an agreement with their creditors before filing. This form of bankruptcy filing is preferred in business since it tends to be less expensive, much quicker, and does not disrupt continuing business operations nearly as much.
NextMedia, an operator of nearly 40 radio stations claimed between $100 million and $500 million in debt when they filed. When all is said and done the control of the company will end up being in the hands of several creditors. Much of their debt will be paid in full while a good percentage will also be turned into equity in the company. The company does not expect any major changes to occur or any disruption of business to happen either. After proceedings are done they will be down to about $128 million in debt remaining.
Like NextMedia, Heartland Publications filed for bankruptcy in Delaware (chapter 11). They put the blame on a decline in advertising revenues along with the rise in competition from internet news sources. The company runs about 50 small town newspapers. Agreements with their creditors, namely GE Capital, will end up cutting their debt nearly in half.
Citadel, owner of 224 radio stations, came to an agreement with most of its lenders that will allow them to use their new secured credit facility to get a $762.5 million loan. The agreement will also see the elimination of about $1.4 billion in debt. However, the current shareholders will essentially get nothing for their investment as 90% of the stock in the newly formed organization will go to creditors. When it filed, Citadel listed assets valued at $1.4 billion with debt of $2.5 billion meaning nearly 60% of the debt will be erased.