Near-Bankruptcy, Broadcaster Faults Loss Of Hannity Revenue

SELF-DESTRUCTION

Political Bias Could Lead To Citadel-ABC Radio's Bankruptcy







In a textbook example of the dangers of placing personal politics ahead of good business sense, past mistreatment of a top conservative talker is partly to blame for a major radio operator's impending bankruptcy.

But don't take our word for it: stunningly, Citadel Broadcasting (which absorbed ABC Radio into its operation several years ago) admits the loss of Sean Hannity's syndicated radio show has cost it millions in desperately-needed cash flow at a time when corporate debt and slow ad sales are crippling its operations.

In the same filing with regulators, the company has disclosed that it may file for protection from creditors in January.

Until now, though, Citadel (OTC:CTDB) had avoided mentioning Chapter 11 as a likely scenario.

The company owns major talk stations including WABC/ New York, WLS/Chicago, KGO-KSFO / San Francisco, WBAP Fort Worth-Dallas, WJR/Detroit and WMAL/Washington.


As we'd reported in 2008, a fed-up Hannity dumped the firm's syndication arm, then called ABC Radio Networks, for Clear Channel's Premiere Radio after disturbing incidents behind the scenes, including the refusal of one Citadel exec to board a plane with the longtime conservative talker.

In addition, Citadel took a hit from the passing of Paul Harvey. While that may have been unavoidable, chasing away Hannity was inexcusable.

From RBR:

The big drop came in the radio network business, now called Citadel Media. Net revenues plunged 31.5% to $29.4 million. The loss of Paul Harvey, who died, and Sean Hannity, who took his show elsewhere, accounted for $8 million of the $13.5 million decline. Segment operating income dropped 92.3% to $500K from $6.5 million a year earlier. The drop in revenue was slightly offset by an 18% reduction in costs.

Citadel has been warning of covenant compliance problems ahead since it reworked its credit agreement with its lenders back in late March. Facing a requirement that it have $150 million of available cash as of January 15, 2010, Citadel has admitted in several SEC filings that it does not expect to be able to meet that requirement and will likely face a financial restructuring which would dilute or wipe out the equity of current shareholders.

And according to Inside Music Media, failed CEO Farid Suleman is currently hoping to work out a deal that would keep top management in place post-bankruptcy. Only in radio (or perhaps banking) could the very people who destroyed the firm have a chance at remaining in their jobs.

Citadel's shares are currently trading at six cents on the over-the-counter bulletin board.



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