Judge orders banks to fund $19 billion Clear Channel buyout

Mar.27, 2008 in Market Outlook

Judge orders banks to fund Clear Channel deal

Pending buyout remains under a cloud as lenders vow to fight litigation

By Riley McDermid, MarketWatch

Last Update: 12:27 PM ET Mar 27, 2008

NEW YORK (MarketWatch) — A Texas district court judge has ordered investment
banks to fund the imperiled $19 billion buyout of Clear Channel Communications by
two private-equity firms, the radio-broadcasting giant said Thursday.

Judge John Gabriel granted a temporary restraining order against the six banks,
according to San Antonio-based Clear Channel (CCU), which sued to hold the banks
to their agreement to fund the massive deal. In light of the deterioration in the
credit markets, the lenders have demanded that the private-equity firms refinance
the agreement.

Shares of Clear Channel Communications rallied 10% in early action, hitting
$29.60. They dropped 17% on Wednesday, in reaction to concerns the buyout
wouldn’t go through.

Clear Channel has agreed to be purchased by Thomas H. Lee Partners and Bain
Capital, in a deal valued at $39.20 a share.

Judge Gabriel, of Bexar County, Texas, “found in favor of Clear Channel’s claim
that irreparable harm would result if the banks were not immediately enjoined
from tortiously interfering with the merger agreement,” the company said in a
statement.

Gabriel “ordered that the banks, among other things, must not ‘interfere with or
thwart consummation of the merger agreement’ by refusing to fund the merger
transaction, insisting on terms that are inconsistent with the commitment letter,
or refusing to act in good faith in the drafting of definitive loan documents,”
the statement added.

Lenders including Citigroup (C), Morgan Stanley (MS), Deutsche Bank (DB), Credit
Suisse (CS), Royal Bank of Scotland (UK:RBS) and Wachovia (WB) have declined to
provide the financing that they once said they would issue.

“It seems clear that lenders’ remorse set in when credit markets worsened,” Bain
and Thomas H. Lee said in a statement issued Wednesday. “Now they are trying to
walk away from their commitment letter, which clearly states that they bear all
the risk that conditions in the debt markets might change.”

The consortium of banks at the center of the dispute vowed Thursday that they
would fight all lawsuits related to the deal.

“The bank group presented the sponsors with credit agreements fully consistent
and compliant with the commitment letter. The bank group has been and remains
prepared to honor the obligations as set forth in that letter,” said a statement
by Citigroup, which is the principal lender in the deal. “We believe the suits
are without merit and will contest them vigorously.”

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