Banks not cooperating in Clear Channel deal

SAN ANTONIO – The lenders committed to financing the $19.5 billion private buyout of Clear Channel Communications Inc. didn’t show up to a meeting of the company and buyers even after a judge issued an order barring the banks from hindering or undermining the deal, the company said in a filing Friday.

Representatives from Clear Channel and the private equity buyers, led by Bain Capital and Thomas H. Lee LLC, met Thursday – the day after a temporary restraining order was issued to bar the banks from purposely sinking the deal. It was also the day previously set for the closing of the buyout.

But the lenders didn’t show, and Clear Channel said in a filing with the Securities and Exchange Commission that “the company continues to be ready, willing and able to consummate the merger. … The company is unable, however, to estimate a closing date at this time and cautions the markets that a closing may not occur.”

Clear Channel shares, which have been volatile since fear that the deal could collapse set in, fell 40 cents, or 1.4 percent, to close at $29.20 Friday.

Clear Channel – which has 17 radio stations in Maine, including eight in Bangor – and the equity buyers sued six banks – Citigroup Inc., Morgan Stanley, Credit Suisse Group, The Royal Bank of Scotland, Deutsche Bank AG and Wachovia Corp. – on Wednesday, saying they were trying to renege on their financing commitment.

The financing, negotiated during the heady days of ever larger leveraged buyouts, would cost the banks an estimated $3 billion to $4 billion if the deal closes. Bain, THL and Clear Channel argued in their lawsuits that the banks tried to undermine the deal by subsequently adding unreasonable terms to the loan.

The banks have said their credit offers were consistent with the commitment letter. A spokeswoman for the lenders declined to comment Friday on the filing.

Bain and THL agreed to pay $39.20 per share for Clear Channel, far more than the stock’s price in the last several months. But if they back out, they’ll be subject to $500 million to $600 million in breakup fees.

A court hearing in the case is scheduled for April 8.

Fred Moran, an analyst with the Stanford Group, said there’s some chance the parties will reach a compromise as the court date approaches, but the financing remains difficult given the credit crunch.

The situation remains fluid, he said. The banks’ failure to show up to the meeting Thursday doesn’t necessarily mean the deal is doomed.

“It doesn’t necessarily mean there can’t be compromise in the future. It just means the parties are at an impasse now,” Moran said.

The lawsuits this week are just the latest scuffle in the effort to take Clear Channel private. The buyout proposal, first announced in November 2006, earlier ran into trouble with shareholders who insisted on a higher per-share price and a chance to keep owning a part of the privatized company.

The leveraged buyout remains the largest pending in the United States.

BDN staff writer Anne Ravana contributed to this report.