900202.11000/6834008v.9

Hearing Date: March 9, 2010 10:00 a.m.

BLANK ROME LLP Counsel to Virtus Capital LLC and Kenneth S. Grossman Pension Plan The Chrysler Building 405 Lexington Avenue New York, New York 10174 Marc E. Richards Andrew B. Eckstein (212) 885-5000

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re: CITADEL BROADCASTING CORPORATION, et al.,

Debtors.

Chapter 11 Case No. 09-17442 (BRL) Jointly Administered

OBJECTION OF VIRTUS CAPITAL LLC AND KENNETH

S. GROSSMAN PENSION PLAN TO THE DISCLOSURE STATEMENT FOR THE JOINT PLAN OF REORGANIZATION OF CITADEL

BROADCASTING CORPORATION AND ITS DEBTOR AFFILIATES PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE

900202.11000/6834008v.9

PRELIMINARY STATEMENT

Virtus Capital LLC and Kenneth S. Grossman Pension Plan (the “Shareholders”) hereby

object to the proposed Disclosure Statement filed by the Debtors, Citadel Broadcast Corporation,

et al. (“Debtors” or “Citadel”) on or about February 3, 2010, (the “Disclosure Statement”).1 As

discussed more fully below, not only does the Disclosure Statement not contain “adequate

information” as that term is defined in section 1125(a) of the Bankruptcy Code, but it contains

outdated, inaccurate and misleading information designed to promote acceptance of the Debtors’

Plan; a plan which severely and misleadingly undervalues the Debtors and their assets and

prospects, and significantly short-changes the Debtors’ creditors and equity holders in favor of

the Debtors’ Bank Lenders and Senior Management.

As discussed more fully below, both the Debtors and the broadcast industry as a whole

are in the midst of a significant turnaround. Yet the Debtors, by virtue of their pre-petition lock-

up agreement with their Bank Lenders, are on course to race through confirmation of the Plan

which understates value to the detriment of a number of constituencies. The Debtors are not

hemorrhaging funds. To the contrary, the Debtors are paying interest to their Bank Lenders and

stockpiling cash, even in the historically slowest revenue period of the year for the broadcasting

business. The only rationale for racing through the plan confirmation process is to enable the

Bank Lenders to seize all of the upside at the expense of creditors and holders of Interests. This

process should be slowed down, so that accurate, comprehensive and current information may

serve as the cornerstone of the Debtors’ plan of reorganization.

1 Capitalized terms not defined herein have the same meaning ascribed to them in the Debtors’ Disclosure Statement and/or “Debtors’ Joint Plan of Reorganization” (the “Plan”).

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A. THE DEBTORS’ DISCLOSURE STATEMENT IS INACCURATE AND PROVIDES MISLEADING INFORMATION

The Plan Significantly Understates Enterprise Value and Equity Value

• The revenue projections set forth in the Disclosure Statement fail to reflect

a broadly-recognized, substantial turnaround underway in the broadcast

industry and need to be updated. These projections cannot be relied upon

by creditors and investors seeking to evaluate the proposed Plan.

• On the cost and expense side, the projections omit substantial savings that

would otherwise be recognized by using bankruptcy to reduce costs

through contract renegotiations and rejections. The Shareholders believe

meaningful cost savings have already been put in place, or will be put in

place shortly, that inexplicably have not been disclosed in the Disclosure

Statement or built into the financial projections.

• The trading multiples used in the Debtors’ valuation analysis is already

outdated. The broadcast turnaround has been broadly recognized and the

public market valuations for broadcast companies have improved

dramatically over the past several months and in fact continue to improve

on a daily basis. The financial analysis needs to be updated to reflect the

increase in current trading multiples to provide adequate disclosure to

creditors and shareholders.

• The valuation analysis in the Disclosure Statement fails to include two

comparable companies in the “Peer Group” which are among the most

comparable companies in the radio broadcasting industry and that are

among those most comparable to the Debtors. The same valuation analysis

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includes companies in the Peer Group that are clearly much poorer

comparisons. The Disclosure Statement needs to explain the reason, if

any, for these apparently erroneous exclusions and inclusions, and disclose

the impact on market multiples and valuation resulting from those

selections. This seems to be a clear example of preferential cherry-

picking.

• Because the revenue projections and changes in valuation metrics have not

been updated to reflect the broadcast industry’s turnaround, the Disclosure

Statement does not adequately disclose or reflect the valuation that would

result therefrom. Such information would demonstrate that there is

substantial enterprise value in excess of the Debtors’ secured indebtedness

and therefore general unsecured creditors in this case should be paid in full

and shareholders should receive a meaningful recovery.

Perhaps most significantly, the Disclosure Statement does not explain to creditors and

shareholders why the Debtors are proceeding with a plan at this time – when broadcast revenues

are turning around and a recovery is under way. Creditors and shareholders need to understand

the reason that the Debtors are opting not to avail themselves of the ability to operate in chapter

11 and use the tools and protections Congress intended to enable them to restructure, reorganize

and turn around their affairs in bankruptcy to maximize value for all constituencies, and are

instead using bankruptcy process to compromise the rights of creditors and shareholders without

providing adequate information.

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B. INADEQUATE DISCLOSURE

FCC Trust Issues

• The Disclosure Statement fails to adequately describe the pitfalls and risks

stemming from the Debtors’ attempts to employ a trust to avoid FCC

foreign ownership restrictions, and the consequences of such action or the

timing attendant to such delay.

• The Disclosure Statement fails to disclose the significant foreign

ownership of the Lenders by hedge funds and private equity buyers as well

as the commercial banks among the Lenders. The result of the Plan –

conversion of said debt to equity – may result in foreign ownership that

may be in violation of FCC limits and therefore this existing group of

Bank Lenders may never be able to close with FCC Approval under the

structure contemplated in the Plan.

Executive Compensation Package

• The Disclosure Statement sets forth the amount and extent that Plan

Securities will be given to Debtors’ Senior Management, but fails to

disclose which individuals will be covered by the Executive Incentive

Program.

• Currently the Plan provides that the Equity Incentive Program will provide

for a certain percentage, not less than 7.5% and not to exceed 10%, on a

fully diluted basis of the issued and outstanding New Common Stock.

Based on the existing understated values at which the Bank Lenders and

Senior Management are to secure equity of the Reorganized Debtors, if the

Reorganized Citadel were valued according to industry experts, the new

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equity of the Reorganized Debtors will be approximately $1.8 billion;

which means Senior Management will receive a staggering sum of

between $135 and $180 million of value. Even assuming the Debtors’

own depressed values for the new equity of $1.1 billion, Senior

Management will receive an equally indecent sum of between $82.5 and

$110 million. The Shareholders submit that the amount of compensation

given to Senior Management is totally inappropriate under the

circumstances here.

BACKGROUND

A. THE DEBTORS’ BANKRUPTCY PROCEEDINGS

1. On December 20, 2009, the Debtors filed voluntary petitions for relief under

Chapter 11 of the Bankruptcy Code. The Debtors have continued in the management and

possession of their assets as Debtors in possession.

2. On February 3, 2010, the Debtors caused their Plan and Disclosure Statement to

be filed with the Court and moved for approval of the Disclosure Statement.

3. A hearing on the Disclosure Statement is currently scheduled for March 9, 2010.

B. THE SHAREHOLDERS

4. The Shareholders collectively own approximately 7 million shares of publicly

traded stock in the debtor, Citadel Broadcasting Corporation, classified in Class 8 under the Plan.

5. Premised upon outdated valuation, projections and performance information

going back to the third-quarter of 2009, the Plan, devised to justify a issuance of 90% of newly

issued equity of the Reorganized Debtors to the Debtors’ Bank Lenders, proposes to fully

extinguish the present holders of equity Interests to their severe prejudice and detriment and not

pay unsecured creditors in full.

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6. The Plan is crafted in accordance with the Plan Support Agreement executed by

the Debtors and the Bank Lenders months ago, shortly after commencement of an industry-wide

recovery, broadly recognized by many third parties, including industry researchers, consultants,

financial experts, peer companies and others. In the subsequent months, the industry’s and the

Debtors’ turnaround has continued unabated. Reliance on the pre-recovery financial data in the

Disclosure Statement misleads parties into believing that the Debtors are hopelessly insolvent;

justifying the prejudicial treatment to unsecured creditors and holders of Interests.

OBJECTIONS

7. The Shareholders object to the Disclosure Statement because it fails to provide

“adequate information,” as that term is defined under 11 U.S.C. § 1125.

I. STANDARD FOR APPROVING DISCLOSURE STATEMENT

8. Section 1125 of the Bankruptcy Code, as amended, provides that a disclosure

statement must, among other things, contain “adequate information.” That term is defined, in

pertinent part, as:

Information of a kind, and in sufficient detail, as far as is reasonably practical in light of the nature and history of the debtor and the condition of the debtor's records, including a discussion of the potential material Federal tax consequences of the plan to the debtor, any successor to the debtor, and a hypothetical investor typical of the holders of claims or interests in the case, that would enable such a hypothetical investor of the relevant class to make an informed judgment about the plan, but adequate information need not include such information about any other possible or proposed plan and in determining whether a disclosure statement provides adequate information, the court shall consider the complexity of the case, the benefit of additional information to creditors and other parties in interest, and the cost of providing additional information[.]

11 U.S.C. § 1125(a)(l) (emphasis added).

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9. This disclosure requirement is “crucial to the effective functioning of the federal

bankruptcy system.” Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 363

(3d Cir. 1996); see also In re Oneida Motor Freight, Inc., 848 F.2d 414, 417 (3d Cir. 1988) (“The

preparing and filing of a disclosure statement is a critical step in the reorganization of the

Chapter 11 debtor.”). The importance of adequate information is underscored by the reliance

creditors and courts place on the information the plan proponent provides in the disclosure

statement in determining whether or not to approve the proposed plan of reorganization. See

Ryan Operations, 81 F.3d at 362; Oneida, 848 F.2d at 417. Without “sufficient financial and

operational information to enable each participant to make an ‘informed judgment’ whether to

approve or reject the proposed plan,” the proposed disclosure statement fails to meet the

requirements of Section 1125(a)(l). In re Civitella, 15 B.R. 206, 208 (Bankr. E.D. Pa. 1981).

10. “Adequate Disclosure” presumes that the disclosure is not inaccurate or

misleading. In re Adelphia Communications Corp., 352 B.R. 592, 600 (Bankr. S.D.N.Y. 2006);

In re Century Glove, Inc., 860 F.2d 94 (3d Cir. 1988). “[A]n adequate disclosure determination

requires a bankruptcy court to find not just that there is enough information there, but also that

what is said is not misleading…it is inconceivable to me that I or any other bankruptcy judge

would regard any disclosure as adequate if known to be inaccurate or misleading.” Adelphia,

352 B.R. at 600.

11. The Disclosure Statement lacks adequate disclosure of the most current and

accurate information of a kind and in sufficient detail to enable parties in interest (and any other

similar holders of Claims or Interests) to determine the proposed treatment of their interests and

make an “informed judgment whether to approve or reject the proposed Plan.” Indeed, the

Disclosure Statement and the Plan contain misleading information and/or omit material facts that

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should be available to holders of Claims or Interests. In order to bring the Disclosure Statement

into compliance with Section 1125 of the Bankruptcy Code and to make the Plan confirmable

under the Bankruptcy Code, the Disclosure Statement and Plan must be modified and updated or

the Disclosure Statement should not be approved.

12. As explained by the court in In re Eastern Maine Elec. Coop., Inc., 125 B.R. 329,

333 (Bankr. D. Me. 1991), the process of evaluating a disclosure statement usually involves two

stages of analysis. First, “[i]f the disclosure statement describes a plan that is so ‘fatally flawed’

that confirmation is ‘impossible,’ the court should exercise its discretion to refuse to consider the

adequacy of disclosures.” Id.; see also, In re Beyond.com Corp., 289 B.R. 138, 140 (Bankr. N.D.

Cal. 2003) (explaining that disclosure statement may not be approved when the underlying plan

is patently unconfirmable); In re Cardinal Congregate I, 121 B.R. 760, 764 (Bankr. S.D. Ohio

1990) (“The Court believes that disapproval of the adequacy of a disclosure statement may

sometimes be appropriate where it describes a plan of reorganization which is so fatally flawed

that confirmation is impossible.”) Indeed, as the proposed treatment of holders of Claims and

Interests is premised upon flawed, outdated and misleading information as set forth in the

Disclosure Statement, it is accordingly fatally flawed. The Disclosure Statement should not be

approved in its current form.

II. INACCURATE FACTS, OUTDATED FINANCIAL INFORMATION AND PROJECTIONS SERVE TO ARTIFICIALLY SUPPRESS VALUE AND PRECLUDE APPROVAL OF DISCLOSURE STATEMENT

A. REVENUE PROJECTIONS ARE VASTLY UNDERSTATED

13. Radio broadcasting is emerging from two years of cyclical decline and is

experiencing double-digit revenue growth in the first quarter and is clearly on pace for

significant growth for the year. In contrast, the Debtors’ projections call for negative revenue

growth in 2010.

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14. Katz Media Group, Inc., a leading national advertising company that represents

over 4,000 radio stations has reported on broadcast radio’s first quarter 2010 year-over-year

national revenue trends2:

• Broadcast radio’s January 2010 actual national revenue was 26% higher than

January 2009.

• Broadcast radio’s first quarter 2010 national revenue is pacing 19% ahead of first

quarter 2009.

15. CBS Corporation reports broadcast revenue results and pacings consistent with

Katz’s report on revenue growth:

“TV stations were the first to see signs of the recovery, which started to benefit Radio in the quarter. And in December Radio had its best month of the year for revenue, led by the Automotive category which was up high single digits. While Q1 is not finished yet, radio stations are pacing up mid-single digits with our top 10 markets showing low teen increases, driven by several advertising categories.” -Joe Ianniello, CFO, February 18, 2010, Earnings Call (emphasis added)

16. Entercom Corp. (a company comparable with the Debtors) concurs on the upward

trend:

“Now looking ahead we are increasingly optimistic about 2010 and 2011 based upon a number of indications of recovery and demand in the ad market and in light of easy comparative results after two ugly years of cyclical economic decline. The fact is that the potential exists for very substantial revenue gains over the next couple of years as we recover from the deep declines in ad spending that have impacted all forms of media. The combination of economic recovery, easy comps, and an improving competitive position relative to other media offer the potential for solid growth in the years ahead.” -David Field, CEO, November 2, 2009, Earnings Call

“Business conditions improved significantly during the fourth quarter and this positive trend has accelerated into the first two

2 As reported by Radio-Info.com on 2/10/2010

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months of 2010.” – David Field, CEO, February 23, 2010, Earnings Call (emphasis added)

B. REVENUE IS EXPECTED TO GROW SIGNIFICANTLY IN 2010

17. Recent industry data and guidance reflect that 2010 revenue growth for the

Debtors will be substantial. There is no known current industry data to support the Debtors’

projections that negative 0.3% revenue growth is reasonable.

18. Pacings reported for the radio broadcast industry for the first quarter of 2010

indicated that the industry will achieve double-digit growth on a year-over-year basis for that

period, with Katz Media reporting 26%, 11% and 13% national revenue growth in January,

February and March, respectively.3 It is highly reasonable to assume continuity of first quarter

trends at least into the second quarter of 2010. Therefore, it is reasonable to assume the Debtors

will experience year-to-year revenue growth in excess of 10% for the first six months of 2010.

19. Although it is harder to project or to assume continuity of year-over-year trends in

the second half of 2010, for the following reasons it is entirely logical to believe that revenues

for the third and fourth quarters of 2010 should continue to be strong.

• 2010 is an active election year, meaning that broadcasters will realize significant

incremental political advertising revenue over 2009, which was not a political

year.

• Political advertising revenue is expected to be realized beginning with primary

season in the late second quarter of 2010.

3 As reported by Radio-Info.com on 2/10/2010

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• The current political climate, plus the recent Supreme Court ruling on political

speech, have led industry participants to anticipate a big political advertising year,

combining both candidate advertising and issue-based advertising. 4

• Car advertisers have begun to return to radio advertising after a tough year of

restructurings and bankruptcies. With these companies now restructured, radio ad

spending has been increasing.

20. Citadel Radio’s 224 radio stations are comprised of 24 large market stations

(“Former ABC Stations”) and 200 middle and smaller market stations. The Former ABC

Stations are located in nine of the top 16 Designated Market Areas, as defined by Arbitron. As

set forth in the Disclosure Statement, the Debtors operate radio stations in each of Los Angeles,

New York Chicago, Dallas/Ft. Worth and San Francisco, which represent respectively, the top

five markets across the country. As evidenced by commentary from CBS Corp.’s CFO, large

market stations typically enjoy a higher proportional share of national revenue, thus positioning

the Debtors to meaningfully participate in the broadcast turnaround underway. Furthermore,

there is no reason to believe that increased political advertising will not be even greater in these

and the Debtors’ other markets this election year.

21. For these reasons, it would be reasonable to assume that the Debtors’ revenues

should grow by 8-10% during 2010. Certainly, based on information now available with respect

to the broadcast turnaround, such an assumption would be far more reasonable than the Debtors’

unsupportable “no growth” or “slight growth” scenario.

4 See generally, G. Palmer, New York Times, Feb. 28, 2010, Decision Could Allow Anonymous Political Contributions By Businesses, “[C]orporations will be able to spend unlimited amounts of money on advertisements expressly advocating for a candidate’s election or defeat.”; B. Baker, Wall Street Journal, January 22, 2010, Networks Decry Campaign Financing Ruling; The Supreme Court’s Defense of First Amendment Rights Is Viewed by the Media as “Opening Floodgates” to “Big Money.”

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• As further evidentiary support, independent research by Jefferies & Co. in early

January, published before double-digit pacing information for 2010 was available,

projected 4.2% revenue growth for the Debtors for 2010.5

Unfortunately none of this information is available in the Disclosure Statement, which as a direct

result, is materially deficient in providing accurate, important and necessary information to

Creditors and Interest Holders. And in fact, there is evidence that the Debtors were aware of

their conservative disclosures, and tried to hide the explosion in cash build-up and earning

growth from creditors, shareholders and the Court. In its 13-Week Cash Forecast, an essential

and important document filed by the Debtors on December 23, 2009, the Debtors estimated the

ending cash balance for January 31, 2010 to be $57.2 million. In fact, the actual cash balance on

January 31, 2010 is $80.2 million, an overage of $23 million. This is a “miss” in forecasting of

40% in just one month!

22. With such a profoundly higher cash balance – undoubtedly stemming from the

higher revenues falling directly to the bottom line in this high fixed cost, low variable cost

business – the Debtors should be rushing to amend their 13-Week Cash Forecast so that they can

deliver greater value to all their constituents. In fact, this is what the equities of the bankruptcy

process require of debtors seeking this Court’s discharge provisions. However, the Debtors have

made no effort to amend their flawed 13-week Cash Forecast and the Court need look no further

for a motivation than the approximately $100 million of compensation that will be taken from

shareholders only to be given directly to the same Senior Management who are prematurely

rushing the Debtors’ emergence from Chapter 11.

5 Jeffries & Company, Inc – Media Sector Update: 4Q09 Outlook - January 8, 2010

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C. EXPENSE PROJECTIONS DO NOT REFLECT SUBSTANTIAL SAVINGS OPPORTUNITIES AVAILABLE IN BANKRUPTCY

23. There are significant expense reduction opportunities that are inexplicably

excluded from the Debtors’ projections. Yet the Debtors are racing towards confirmation in

overdrive. This is hardly a wasting asset or a melting ice cube. In fact, based upon the Debtors’

actual performance reflecting a February 15, 2010 cash balance of $82.7 million, $18 million

greater than projected two months earlier, the cash on hand by April 30, 2010 may well exceed

$100 million. Curiously, the Liquidation Analysis uses a February 15, 2010 date which is a date

now past and not relevant to even a theoretical Liquidation Analysis which states cash on hand of

$82.7 million. Why did the Debtors fail to use the April 30, 2010 date which would create the

required “apples-to-apples” comparison with the proposed Emergence Date under a

reorganization plan? The inescapable conclusion is that a decision was made by the Debtors not

to show Citadel’s improved operations and performance being projected forward in the

Disclosure Statement.

24. There is absolutely no evidence that the assets of the Debtors are being

diminished by remaining in bankruptcy. In fact, the evidence is overwhelming to the contrary.

Since the bankruptcy filing on December 20, 2009, according to the Monthly Operating Report

(“MOR”) filed by the Debtors on February 25, 2010, the Debtors’ cash on hand increased from

$49,145,742 on December 20, 2009, to $80,220,953 on January 31, 2010. Presumably, today the

cash balances are even higher. Further, the Debtors turned a Net Income profit of $4,600,676 for

the 42 days from December 20, 2009 through January 31, 2010. Apparently, bankruptcy agrees

with these Debtors as both cash on hand and profitability (as measured by net income) have

grown for the short time Citadel has been a debtor. The Net Income generation should be of

particular interest as the existence of positive net income – particularly as here when it is

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generated by sheer revenues exceeding operating expenses without any accounting reversals or

reserves – is the surest sign that there is positive value for the shareholders.

25. The actual expense reduction opportunity cannot be known by the Shareholders,

but it appears reasonable to assume that at least a 6% cost reduction can be achieved in

bankruptcy, or $30 million annually, having a significant impact on value.6

26. The Shareholders readily acknowledge that in some circumstances, where a

debtor is unraveling for any number of reasons, a race to confirmation or sale is often critical.

By contrast, where market conditions, along with the debtor’s actual performance, are

improving, there is often benefit to stakeholders to permit the scope of improvement to fully

manifest itself before committing to a plan of reorganization that adversely affects certain

stakeholders.7 This Court on numerous occasions has allowed a debtor sufficient time and

opportunity to work though the myriad of issues and hurdles to accomplish a successful

reorganization. As this Court stated long ago in citing the Second Circuit holding in Johns-

Manville Corp., 801 F.2d 60, 62, “The purpose of the protection provided by Chapter 11 is to

give the debtor a breathing spell, an opportunity to rehabilitate its business and to enable the

debtor to generate revenue.” In re Ionosphere Clubs, 105 B.R. 773, 777 (Bankr. S.D.N.Y. 1989).

In many instances the debtor was not able to realize increased profitability so quickly after the

petition date. Here the Debtors’ performance, even in so short a period, has been remarkable.

Yet the Debtors are pursuing a Plan that does not pay Creditors in full, wipes out equity, and

6 It should be noted that the arguments made and comparisons to other broadcasters herein are all taken from publicly available information. The Shareholders have not been granted official status and have not conducted any due diligence of the Debtors’ operations beyond that which has been stated/published by the Debtors in public filings. 7 Consider the General Growth Properties case, where with the modest passage of time has resulted in increased enterprise value for the benefit of stakeholders.

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enriches Senior Management and the Bank Lenders in an unconscionable fashion. Surely that is

not the purpose of Chapter 11.

D. THE DISCLOSURE STATEMENT FAILS TO PROVIDE ADEQUATE DISCLOSURE OF RECENT, UNEXPLAINED FINANCIAL RESULTS

27. The Disclosure Statement fails to explain recent financial disclosures that indicate

that the Debtors may be accumulating cash at a rate significantly in excess of the Debtors’

projections or the reason for such accumulation.

28. The Debtors’ cash flow projection filed on December 23, 2009 estimated cash for

the week ending February 12, 2010 would be $64.7 million. However, upon the filing of the

Disclosure Statement on February 3, 2010, the Debtors stated, tucked away on page 86 of an 88

page filing, that “The cash balance as of February 15, 2010 has been estimated at $82.7 million.”

As noted, this is an $18 million improvement in the Debtors’ cash balance.

29. The Debtors’ actual cash balance as reflected in their MOR as of January 31,

2010 was $80.2 million, as opposed to their 13 week forecast projection of $57.2 million; a $23

million favorable increase.

30. The 13 week forecast projected $92 million of receipts from October 20, 2009

through January 29, 2010. The January MOR reflects that operational receipts were $98 million;

a $6 million favorable increase. This data is corroborative of an increase in revenue of at least

6.5%.

31. The 13 week forecast projected $72 million of disbursements for the period from

October 20, 2009 through January 29, 2010. The January MOR reflects that disbursements for

the period were $67 million for such period; $5 million less than projected. This data is

corroborative of a run-rate of expense and contract negotiation savings of at least $30 million per

year.

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32. The beginning cash balance on December 20, 2009, according to the 13 week

projection, was $36.5 million. The January MOR reflects that beginning cash was actually $49.2

million; over $12 million more than originally reflected. With the 13 week forecast having been

filed with this Court on December 23, 2009 – three days after the December 20, 2009 cash

balance was known – the question must be raised as to why the Debtors used an inaccurate

starting cash balance? This Court should not automatically defer to the Debtors’ judgment in

agreeing to wipe out shareholder interests, but should make the Debtors re-analyze the

company’s condition and report back to the Court with new projections.

33. The Debtors’ actual performance to date bears out that the Debtors’ performance

will continue to be far better than that projected to justify the Plan and should be addressed, and

not overlooked, in the Disclosure Statement. Respectfully, the Court should insist and require

the Debtors’ meaningful improvements in disclosure.

E. REVISED 2010 EARNINGS ASSUMPTIONS SUGGEST SUBSTANTIAL EQUITY VALUE

34. The adjustments to bring revenues and expense savings into line with actual

experience suggest potential 2010 operating cash flow often referred to as “EBITDA,” or

Earnings Before Interest, Taxes and Depreciation, increasing from Debtors’ low-ball estimate of

$209.7 million to a more realistic $269.6 million.

• These revised projections are based upon comments from industry insiders

referred to elsewhere in this objection and are applied to the Debtors’ business

structure.

• The revised projections include a reasonably conservative 8% year-over-year

growth rate for 2010 revenue, reflecting current trends.

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• The revised projections exclude incremental expense reductions that should be

available to the Debtors while operating under the protection of the automatic stay

($ in millions) For Year Ending December 31, 2010 Disclosure Statement

Projections Revised Projections Net Revenue $721.3 $781.4 Operating Expenses (491.8) (491.8) Corporate Overhead (20.0) (20.0) EBITDA $209.7 $269.6 F. OBSOLETE VALUATION METRICS NEED TO BE UPDATED

35. The Debtors’ advisor, Lazard, uses an obsolete range of 7.4x to 8.4x market

trading multiple of Total Enterprise Value (“TEV”) to last 12 month (“LTM”) EBITDA for its

“Peer Group” as of September 30, 2009. In the last month alone, significant changes in the

market for publicly traded radio broadcasting stocks have rendered this range of multiples

obsolete. Updating the enterprise value to a current March 3, 2010 date increases the mean

valuation multiple to 9.1x which is higher than any of the ranges used by Lazard.

Lazard Peer Group – Data Updated as of 3/3/2010 -($ in millions)

Company Name Market

Cap. Net

Debt TEV

LTM (“Last 12 Months”) Revenue

LTM EBITDA

TEV / EBITDA

Entercom Communications Corp.

411.5 766.4 1,177.9 380.5 99.1 11.9

Radio One Inc.8 177.6 646.9 830.1 280.6 81.9 10.1 Salem Communications 129.7 300.0 429.7 202.0 54.6 7.9 Saga Communications, Inc. 63.9 114.0 177.9 123.9 27.0 6.6 Mean 9.1x G. INAPPROPRIATE VALUATION METRICS

ARTIFICIALLY DEPRESS ENTERPRISE VALUE

36. The “Peer Group” of comparable companies used by Lazard is inappropriate.

8 Include Minority Interests and/or Preferred Equity at Market Price.

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37. Lazard excludes Emmis Communications Corp. (“Emmis”) and Cumulus Media,

Inc. (“Cumulus”), comparable companies that trade at higher multiples than the “Peer Group”

currently reflected in the Disclosure Statement and that are widely considered to be closely

comparable to the Debtors’, including by industry analysts at Jefferies & Co. and Capital IQ.9

Notably, Bloomberg, one of the industry standards for comparable company valuations, selects

both Emmis and Cumulus on its “Bloomberg Peers” screen as comparable companies to Citadel.

To exclude these two companies from this important valuation decision is sheer bias.

38. Lazard’s Peer Group analysis is skewed and incomplete. By substituting

Cumulus and Emmis, which are more comparable to the Debtors, for Radio One Inc. (“Radio

One”), Saga Communications Inc. (“Saga”) and Salem Communications (“Salem”), which are

not listed as a Bloomberg Peer for Citadel in Lazard’s analysis, a “Revised Comp Set” with a

12.1x TEV to EBITDA trading multiple results, even using obsolete trading prices from

February 3, 2010.

• Like the Debtors and Entercom, Cumulus and Emmis radio station portfolios

consist of large and mid-sized markets that diversify across popular music and

talk radio genres to maximize audience reach.

• In contrast, Salem’s format is Christian and Conservative Talk focused; Radio

One targets African-American audiences in urban markets; and Saga broadcasts to

small, rural markets. All three of these companies are geared to specific niche

markets.

• Larger and more diverse radio broadcasters like Entercom, Cumulus and Emmis

are more comparable to Citadel than smaller, niche focused companies, like 9 Source: Media Sector Update: 4Q09 Outlook; Jeffries & Co.; January

Source: Comparable Company Analysis, Capital IQ, Inc., a division of Standard & Poor’s, accessed February 2, 2010

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Salem and Radio One, particularly if given the reach of the legacy and industry

dominance of the Former or ABC Stations that Citadel acquired from Disney.

Table A: A Revised Comparable Set of Peer Companies – Data as of 2/3/2010 -($ in millions).

Company Name Market

Cap. Net

Debt TEV LTM

RevenueLTM

EBITDA TEV /

EBITDACitadel Broadcasting Corp. 12.5 2,060.1 2,072.6 723.7 197.3 10.5x Entercom Communications Corp.

331.4 766.4 1,097.8 380.5 99.1 11.1x

Emmis Communications Corp.10

45.2 333.8 524.5 276.2 32.0 16.4x

Cumulus Media Inc. 104.9 623.3 728.2 261.5 70.2 10.4x Mean 12.1x Mean (ex-Citadel) 12.6x

39. Simply adding Cumulus and Emmis to Lazard’s group of comparable companies

(without removing less comparable Radio One, Saga and Salem) results in a “Baseline Comp

Set” with a 10.4x trading multiple that is far more realistic than Lazard’s “Peer Group” and much

more conservative than the “Revised Comp Set”, again, even using obsolete trading prices from

February 3, 2010. Adding Cumulus and Emmis reduces the effect of bias in the valuation by

excluding these directly comparable companies.

10 Include Minority Interests and/or Preferred Equity at Market Price.

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Baseline Comp Set -Data as of 2/3/2010 -($ in millions).

Company Name Market

Cap. Net

Debt TEV LTM

RevenueLTM

EBITDA TEV /

EBITDACitadel Broadcasting Corp. 12.5 2,060.1 2,072.6 723.7 197.3 10.5x Entercom Communications Corp.

331.4 766.4 1,097.8 380.5 99.1 11.1x

Radio One Inc.11 181.4 646.9 833.9 280.6 81.9 10.2x Emmis Communications Corp.

45.2 333.8 524.5 276.2 32.0 16.4x

Cumulus Media Inc. 104.9 623.3 728.2 261.5 70.2 10.4x Salem Communications 123.1 300.0 423.1 202.0 54.6 7.7x Saga Communications, Inc. 59.6 114.0 173.6 123.9 27.0 6.4x Mean 10.4x Mean (ex-Citadel) 10.4x

40. An 11.0x valuation multiple, representing a midpoint between the Baseline Mean

of 10.4x and Revised Mean of 12.1x, is eminently reasonable to determine the Debtors’ value,

and certainly far more accurate than the artificially depressed and outdated 7.4x to 8.4x valuation

multiple used in the Disclosure Statement.

41. Using an appropriate Peer Group to derive a current trading multiple, and revising

obsolete assumptions for 2010 revenue to reflect current information about the broadcast

turnaround, it is evident that the Debtors’ enterprise value significantly exceeds its total

indebtedness.

Table B: Valuation with Updated Multiple: Using Disclosure Statement Projections

2010 EBITDA $209.7 Updated Trading Multiple 11.0x Enterprise Value $2,306.7 Plus : Current Cash on Hand – 2/15/10 82.7 Current Total Enterprise Value 2,389.4 Less : Current Indebtedness (2,120.1) Implied Equity Value $269.3

11 Include Minority Interests and/or Preferred Equity at Market Price.

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Table C: Valuation with Updated Multiple: Using Revised Projections

2010 EBITDA (8% revenue growth) $269.6 Current Trading Multiple 11.0x Enterprise Value $2,959.6 Plus : Current Cash on Hand – 2/15/10 82.7 Current Total Enterprise Value 3,048.3 Less : Current Indebtedness (2,120.1) Implied Equity Value $928.2

42. And the implication for the use of artificially low multiples by the Debtors is

legally significant. If the true Enterprise Value of the Debtors is $2.389 billion, as shown in

Table B above, and the Debtors will confirm a plan with only $762 million of debt and 90% of

the remaining equity going to the Banks, that would provide total value to the Banks of $2.227

billion ($762 mm + 90% x ($2,389.4 - $762 mm) = $2.227 billion) for recoveries of 105%.

43. The picture is even worse if the Enterprise Value as shown in Table C turns out to

be the more accurate valuation. Under Table C’s values, the Banks would receive total value of

$2.819 billion ($762 mm + 90% x ($3,048.3 - $762 mm) = $2.819 billion) for recoveries of

133%. As constructed, this is exactly what the Plan does.

44. The Shareholders believe that the Plan, which purports to deliver greater than a

100% return to the Bank Lenders, is fatally flawed and that the Disclosure Statement supporting

the Plan cannot be approved.

45. That the Plan unfairly favors the Lenders is self-evident. The original bank loan

agreements called for the Banks to be paid interest of LIBOR plus 2.50%. Currently LIBOR is

no higher than 1.00%, so the original terms of the loans called for the banks to earn a 3.50% rate

of interest. On $2.120 billion of debt, that would amount to annual cash interest expense of

$74.2 million. Under the Plan, the Debtors will pay an 11% rate of interest on $762 million,

which will create annual cash interest expense of $84 million. While it appears that the Banks

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are reducing the Debtors’ indebtedness by two-thirds, they are actually increasing the Debtors’

cash interest burden. So why are the Debtors rushing into this Plan?

46. Of equal concern is that the low debt level and high interest rate on Citadel’s

proposed new bank lines is unsupportable by comparisons with other radio broadcasting

companies. Reviewing the data in Table A above shows that every comparable radio company

has Debt to EBITDA ratios of between 6x and 10x, with the median at around 8x. Citadel, under

the Plan, will have a Debt to EBITDA ratio of only 3.7x under the Debtors’ low-ball forecast and

would have a Debt to EBITDA ratio of only 2.8x under the Revised Projections in Table C. The

Plan has an incredibly high 11% interest rate placed on debt that would be on a company with an

industry-low Debt to EBITDA ratio of between 2.8x and 3.7x.

47. The Disclosure Statement fails to provide adequate information to demonstrate to

creditors and shareholders that there is substantial enterprise value in excess of indebtedness and

consequently creditors should be paid in full and shareholders should receive a meaningful

distribution.

48. The Debtors’ January MOR demonstrates that Citadel’s strong cash flow

generation continues to ensure the adequate protection of secured lenders. In fact, the evidence

to date confirms that Citadel will generate substantial positive cash flow for every month it

remains in Chapter 11, thereby increasing its enterprise value. As such, there is no justifiable

reason as to why the Debtors must rush through the chapter 11 process, forgoing the

restructuring tools afforded by the automatic stay and ignoring the broadcast turnaround

underway.

49. The broadcast radio industry is not experiencing a secular decline contrary to

what the Debtors assert:

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• Historically, radio has lost less market share than other advertising media.

• A JPMorgan Local Advertising Research Report published in 2009 confirms that

Radio has increased its share of local advertising expenditures throughout the last

decade12:

• Radio’s local ad share increased significantly from 14.1% in 1997 to a

projected 17.6% in 2009.

• Broadcast Television’s local ad share increased slightly from 23.1% in

1997 to a projected 23.4% in 2009.

• Newspapers share of local ad share decreased from 39.9% in 1997 to a

projected 29.3% in 2009.

• Long-term local advertising trends combined with the irrefutable evidence of the

strong radio turnaround currently underway discredit the claim that radio is

experiencing a secular decline, and argues for a more patient and relaxed timeline

than the pell-mell rush currently underway as manifested by the Plan.

50. The recent turnaround demonstrates that radio broadcasting has survived and

passed a cyclical downturn and remains strong and is recovering further. Creditors and

shareholders should be afforded the benefit of that turnaround in the form of increased time to

reorganize which will directly lead to increased recoveries for all stakeholders. Secured creditor

recoveries would not be compromised and adequate protection can be provided. Perhaps Senior

Management’s recovery may not be as rich, but that would be the only constituency prejudiced.

12 JPMorgan North American Equity Research, 4/3/2009; Table 90, Estimated Local Advertising Expenditures

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III. INADEQUATE DISCLOSURE REGARDING FCC TRUST PRECLUDES APPROVAL OF DISCLOSURE STATEMENT

51. Exhibit C of the Disclosure Statement, FCC Considerations, goes to great lengths

advising that FCC Approval must be obtained by virtue of the Change in Ownership, in

connection with the Debtors’ emergence from Chapter 11. The Disclosure Statement discusses

the FCC Long Term Application to be submitted to obtain approval of the Transfer of Control

and the use of the FCC Short Term Application, should the Long Term Application be delayed

or protracted.

52. The Disclosure Statement cites to Section 310(b) of the Communications Act

which restricts foreign ownership or control of any entity licensed to provide broadcast services.

Foreign entities may not have direct or indirect ownership or voting rights of more than 25% in a

corporation controlling the license of a radio broadcast station. Because direct and indirect

ownership of Reorganized Citadel’s shares by non-U.S. persons or entities will proportionally

affect the level of deemed foreign ownership and control rights of Reorganized Citadel’s,

prospective shareholders, principally the Bank Lenders, will be required to provide information

to Citadel on their foreign ownership and control.

53. The Equity Allocation Mechanism is supposed to happen under the auspices of

the FCC Trust, a document which is described but not included. More importantly, it is unclear

by virtue of the makeup of the Bank Lenders whether the Reorganized Citadel, owned and

controlled by the FCC Trust, will exceed the foreign ownership limitations. This is a risk that is

hardly mentioned in passing and is impossible to assess today.

54. Further, given the level of foreign investors in most US hedge funds and private

equity funds, it is commonly expected that more than 25% of their investors be foreigners. This

is an inquiry that the Court should undertake and the Debtors should provide greater

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transparency of the proposed shareholder group. It is entirely possible that as the deal is

currently structured the Banks may exceed the 25% threshold today.

55. The Disclosure Statement states that the Holders of Senior Claims and General

Unsecured Claims will be issued Special Warrants which can be exercised for shares of New

Common Stock, subject to certain conditions, including provision of Ownership Certification.

But what happens if the level of Foreign Ownership exceeds the 25% threshold? These are risks

that should be elaborated upon, at the very least.

56. And what happens if during the time the FCC struggles with all the objections to

the ownership of Citadel by this group of investors, the Debtors continue to generate tremendous

cash flow, as they are currently doing, and it is clear that there is substantial equity value, yet the

Plan fails as a result of the FCC’s decision but the old shares have been cancelled? Then there is

one big mess. There will be the unprecedented situation of a class of shareholders wiped out

according to a Plan that is no longer confirmable, while simultaneously there is uncontroverted

evidence that there is or would have been substantial equity for these prematurely wiped out

shareholders. This is a scenario that this Plan could lead to but that this Court should not accede

to. And at the heart of the matter, this illustrates one of the many fatal flaws in the structure of

the Plan and should not be approved by this Court.

IV. INADEQUATE DISCLOSURE REGARDING EXECUTIVE COMPENSATION PRECLUDES APPROVAL OF DISCLOSURE STATEMENT

57. It is assumed that the Debtors’ Executive Management will participate in some

fashion by receiving Special Warrants for New Common Stock. Although the Plan contains

some discussion concerning the terms and conditions of such grants, there is no discussion as to

which individuals would be covered. Creditors and parties in interest are certainly entitled to

know pursuant to section 1129(a)(5) of the Code.

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58. As noted, the Plan provides that the Equity Incentive Program will provide no less

than 7.5% or greater than 10% on a fully diluted basis, of the issued and outstanding new

common stock to be given to Senior Management. Based on the Debtors’ understated valuation

model as discussed above, the New Equity of the Reorganized Debtors will be worth at least $1.1

billion. Hence, the Senior Management would receive New Common Stock of no less than

$82.5 million (7.5%) and up to $110 million (10%). This is completely unsupportable.

59. As noted, the Shareholders believe that the true value of Reorganized Citadel,

according to industry experts and the use of proper metrics, is approximately at least $1.8 billion.

Accordingly, under these more realistic metrics, the Equity Incentive Program would be valued

at between $135 million (7.5%) and $180 million (10%); even more staggering and nothing short

of unconscionable.

60. In these days of financial bail-outs and TARP, where management bonuses are

falling under greater scrutiny, the Bank Lenders’ assent to the proposed amount of compensation

to Senior Management at the expense of holders of Claims and Interests is shocking to the

conscience and inconsistent with today’s financial mores. The Reorganized Debtors will be

owned by the Bank Lenders. The Pay Czar, Kenneth Feinberg, would likely view these

windfalls to Senior Management with a highly jaundiced eye.

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CONCLUSION

For the foregoing reasons and under reservation of its right to supplement their

objections, the Shareholders respectfully requests that the Disclosure Statement not be approved

because the Plan is “fatally flawed”. In the alternative, the Shareholders respectfully request the

Court to require the Debtors to withdraw and amend the Disclosure Statement and provide a

reasonable period for filing objections prior to a disclosure hearing.

Dated: New York, New York March 5, 2010

Counsel to the Shareholders BLANK ROME LLP

By: _/s/ Marc E. Richards______ Marc E. Richards Andrew B. Eckstein The Chrysler Building 405 Lexington Avenue New York, New York 10174 (212) 885-5000