Three Media Companies File for Bankruptcy

Three media companies filed for chapter 11 bankruptcy in the last 48 hours, hurt by drops in advertising revenue and unable to continue repaying heavy debt loads.

Citadel, the largest of the three companies filed for bankruptcy on Sunday, while Broadcaster NextMedia Group Inc. and Heartland Publications Inc. filed Monday. The companies are expected to quickly emerge from bankruptcy due to their prearranged debt settlements with lenders. Many media companies took on excessive debt during the past eight years and are finding it increasingly difficult to service those debts given the economic environment. Jan Baker of the bankruptcy firm Latham Watkins said, "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." Citadel currently has assets totaling $1.4 billion and a $2.5 billion debt load. The prearranged deal, first subject to bankruptcy approval, would remove $1.4 billion of debt and wipe out all current shareholders. Lenders are expected to receive 90 percent of common stock in a the post bankruptcy Citadel as part of the debt settlement deal. Heartland, a newspaper publishing company responsible for 50 local newspapers, is expected to cut its $166.2 million debt by half. Heartland's first line lenders, led by General Electric, have agreed to a deal that would ensure "meaningful returns" for first line lenders. NextMedia is responsible for 36 AM and FM station and carries between $100 and $500 million dollars of debt. According to an affidavit filed by NextMedia, all first line debt will be paid in full while second line debt will be converted into a 95 percent stake in the new company. The company's outstanding debt following bankruptcy will total $128 million.