Banks: Clear Channel Liability Should Be Limited To $600M

By Daniel | April 4, 2008

NEW YORK (Dow Jones)–The banks embroiled in a dispute over financing a stalled
$19.4 billion buyout of Clear Channel Communications Inc. (CCU) said in court
papers Friday that their liability in the matter should be limited to no more
than $600 million.

In counterclaims filed in New York state court Friday, the banking group asked a
state judge to dismiss a New York case brought by two private-equity firms who
agreed to acquire Clear Channel and enter a declaration that their potential
liability is limited to $600 million or less. A separate lawsuit in Texas is
seeking $26 billion in damages from the banks.

“The commitment letter and the merger agreement contain certain provisions that
are intended to limit the banks’ potential liability to plaintiffs and
counterclaim defendants,” the banks said in court filings Friday. “A dispute
plainly exists as to the legal rights and obligations of the banks with respect
to the counterclaim defendants.”

As expected, the banks also asked that Clear Channel, which is a party in the
Texas case, be added as a party to the New York lawsuit on Friday.

Last month, buyout firms Thomas H. Lee Partners and Bain Capital LLC filed
lawsuits in state courts in New York and Texas alleging the banks - Citigroup
Inc. (C), Morgan Stanley (MS), Credit Suisse Group (CS), Royal Bank of Scotland
Group PLC (RBS), Deutsche Bank AG (DB) and Wachovia Corp. (WB) - were improperly
trying to forgo funding the deal.

They are alleging breach of contract and fraud in the New York case and improper
interference with the merger by the banks in the Texas case.

In their filing Friday, the banks said they were “engaging in good faith
negotiations” in late March when the private-equity firms have alleged they
breached their funding obligations and “the time for performance under the
commitment letter had not passed.”

Under the deal, THL Partners and Bain Capital would acquire Clear Channel for
$19.4 billion and take on $7.8 billion of its debt. The banks had agreed to
provide more than $22 billion in financing.

The acquisition agreement was initially reached in November 2006, and the banks
revised their commitment letter to fund the deal in May 2007.

Since then, the credit-market crunch has made it more difficult for the banks to
reduce their risks by selling the debt in the secondary market.

Earlier this week, a federal judge in Texas ruled the case should be heard in
state court in Bexar County, Texas, where Clear Channel is based.

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