• by Erik Sass  @eriksass1, December 10, 2009

Citadel Broadcasting will file for Chapter 11 bankruptcy protection by the end of this month, according to The Wall Street Journal. Citadel's move, which has been expected for some time, follows a series of other financial setbacks in the radio business, including multiple bankruptcies and stock delistings.

The same report has Citadel conferring with lenders for approval of a "prearranged" bankruptcy package in which management would essentially hand over ownership of the company to lenders in exchange for the latter, forgiving about $2 billion of a $2.76 billion-dollar debt -- much of it accumulated through pricey acquisitions at the height of the credit bubble.

In total, the lenders would receive 99.5% of the company's equity for writing off this amount of debt.

The plan already has the support of scores of smaller lenders, including JP Morgan Chase and GE Capital, but will require the approval of other lenders to go forward. Altogether, the group of lenders includes about 90 different entities.

If lenders assume control of the company, current shareholders will lose all their equity. Currently, the shares trade for less than $0.05. Citadel was delisted from the New York Stock Exchange in February 2009, and the company raised the possibility of a default followed by bankruptcy filing in its third-quarter earnings announcement.

The radio business has been beset by financial woes over the last couple of years, aggravated by one of the worst economic downturns in living memory.

Earlier this month, Regent Communications was warned by NASDAQ that it still faced delisting after failing to regain compliance with NASDAQ's minimum qualifications -- principally having a share price above $1.

Cumulus, Emmis, and Radio One have also flirted with bankruptcy.