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Cashing in to ease debt

Taking advantage of the rebounding ad market to get out from under crushing debt, radio-station group Citadel Broadcasting filed to go public.

The Las Vegas-based company is looking to raise $525 million, cash that will go a long way toward easing its $1.1 billion debt load, a huge multiple of Citadel's annual cash flow.

Citadel, concentrating on small markets, many of which lack any kind of listener ratings, was acquired by buyout group Forstmann, Little & Co. last June for about $2 billion. When it first priced the deal, Forstmann, Little expected the group to generate $130 million in cash flow for 2001, says one Wall Street exec familiar with the deal.

If Citadel had achieved the target, its debt would have been 8.2 times cash flow, high even by media standards. But the recession cut earnings to just $88 million, ballooning leverage to 12 times cash flow.

Cash flow should improve this year. Wachovia Securities media analyst Jim Boyle said, broadly, ad pacings in radio second and third quarters are surprisingly strong.

Radio stocks have already rebounded from their recession low of 13 times cash flow to an average of 18 times cash flow. The dotcom bubble that had teeny companies pouring cash into radio ads had sent stocks to 27 times cash flow in 1999-2000.

The IPO could mean a fat payday for Chairman/CEO Farid Suleman, the ex-CEO of Viacom's Infinity Broadcasting radio unit. The filing shows, in addition to $2 million in annual salary and bonuses, Suleman has options for four million Citadel shares exercisable at $3.50 each. Citadel didn't give the expected sale price of the IPO shares, but a $12-$15 range would make Suleman's options worth $34 million to $46 million.

LIN Broadcasting re-emerged in public markets May 3, selling $374 million in shares at $22 each. Its stock now stands at $26.