Citadel Responds To Court Challenge Of Employee Stock Awards
October 26, 2010 at 4:26 AM (PT)
CITADEL BROADCASTING has filed a response in U.S. Bankruptcy Court to R2 INVESTMENTS' objection to the stock bonuses granted to over 180 CITADEL employees after its reorganization, telling the court that R2 is "seeking to have the Court restrict the New Board’s ability to comply with its duties and do its job -- which is to make decisions intended to maximize the value of the corporation and, consequently, the interests of shareholders."
R2 objected to the grant of restricted stock and asked the court to require CITADEL's new board to grant options rather than award stock outright; CITADEL called R2's motion "nothing more than a desperate effort to ask the Court to substitute its judgment for that of the New Board."
CITADEL said in its filing MONDAY (10/25) that "R2 ignores several key facts in its request for the Court to substitute its judgment for that of the New Board’s," noting that the stock awards were "negotiated with, and ultimately approved by, the Senior Agent and the Requisite Participating Lenders; six of the seven members of the New Board were appointed by the Requisite Participating Lenders; the New Board was appointed on the Effective Date (and, thus, did not participate in CITADEL’s chapter 11 cases); the New Board met for the first time only after CITADEL’s emergence from chapter 11; and the restricted stock granted by the New Board was awarded two months after CITADEL’s emergence from chapter 11."
CITADEL, which also contested the court's jurisdiction over the bonuses, characterized the grant of stock as "consistent with the power and authority granted to the New Board under DELAWARE law and CITADEL’s governing documents."
Also on MONDAY, VIRTUS CAPITAL LLC and the KENNETH S. GROSSMAN PENSION PLAN filed a motion to join R2's motion.