LBO Firms, Banks Settle Clear Channel Suit
May 14, 2008
The buyout firms and banks involved in the Clear Channel buyout have settled their dispute. The settlement ends a lawsuit stemming from the company's $20 billion buyout. The trial in New York State court was adjourned this morning.
Private equity buyers Thomas H. Lee Partners and Bain Capital Partners and the bank consortium of Citigroup, Morgan Stanley, Credit Suisse, the Royal Bank of Scotland, Deutsche Bank and Wachovia have agreed to complete the buyout at a lower price of $17.9 billion, or $36 per share. The banks have 14 days to fund the deal. Shareholders, expected to vote on the deal in August or September, will have the option of co-investing in the company.
The lawsuit stems from one of the largest buyout deals to run into legal problems over debt financing in the wake of the credit market crisis that began last year. The LBO firms filed complaints in New York and Texas in March against the banks, accusing them of attempting to back out of their agreement to finance the deal. The company joined the Texas suit.
The buyout consortium said the banks had asked for a change in terms that prevented the deal from being completed. The banks said that they were abiding by the commitment letter and were ready to fund the deal "on mutually agreeable terms." The company had $19.5 billion in leveraged loans and $2.6 billion pending in high yield bonds, according to Fitch Ratings’ forward high yield and leveraged loan calendars.
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