Citadel plans tender for 1.875% convertibles as part of settlement

By Laura Lutz

Des Moines, Feb. 12 - Citadel Broadcasting Corp. plans to conduct a tender offer for all of its outstanding 1.875% convertible subordinated notes due 2011, according to an 8-K filing with the Securities and Exchange Commission.

Under the offer, Citadel would buy up to $55 million principal amount of notes at $900 per $1,000 principal amount of notes.

Any notes tendered beyond $55 million would be exchanged for an equal principal amount of amended and restated convertible subordinated notes due 2011.

The amended notes would initially bear interest at 4% per year, effective retroactively from Jan. 1, 2008.

If more than $165 million of amended notes are outstanding on Dec. 31, 2008, the interest rate will be raised to 6% retroactively from Jan. 1, 2008, and the annual rate from Jan. 1, 2009 on will be amended to make holders whole for any discount at which the notes are then trading.

If no more than $165 million of amended notes are outstanding on Dec. 31, 2008, the interest rate will be raised to 8% from Jan. 1, 2009 to Dec. 31, 2009, and the annual rate from Jan. 1, 2010 on will be amended to make holders whole for any discount at which the notes are then trading.

The amended notes would be callable at 90% of par plus accrued interest during 2008 and at 95% of par plus accrued interest during the first half of 2009. During the second half of 2009, they would be callable at 95% of par plus accrued interest if no more than $165 million of notes were outstanding or at par plus accrued interest otherwise.

Citadel would be required to redeem the amended notes in certain circumstances, depending on asset sales.

The tender offer is part of a preliminary agreement between Citadel and a majority of the holders of the 1.875% notes to settle litigation in the Supreme Court for the State of New York related to the notes.

In that lawsuit, some holders claimed that Citadel was in default under the notes because of Citadel's acquisition of the ABN radio network and radio station businesses from Walt Disney Co.

Under the agreement, the holders would waive any claims relating to the acquisition.

Finalization of the settlement depends on consent from Disney.

Citadel is a Las Vegas-based radio company.

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