Media giant, buyers in talks over loan dispute
Clear Channel Communications and its prospective buyers are talking with banks to try to settle a dispute over whether the banks must fund promised loans for the $19.5 billion takeover, the radio and outdoor advertising company said Monday.
Clear Channel shares jumped $2.87, or 9.6%, to $32.87. The company cautioned that there is no guarantee the talks will result in a settlement.
San Antonio-based Clear Channel and its private equity buyers, Bain Capital and Thomas H. Lee Partners, sued a consortium of six banks, led by Citigroup, accusing them of trying to undermine the deal by changing the terms.
That lawsuit is pending in a Texas court, while the equity firms have a separate suit pending against the banks in a New York court. The banks have countersued in New York.
Court proceedings in both New York and Texas were postponed Monday, with no official explanation given.
Reps for the banks and the private equity firms declined to comment.
The Wall Street Journal has reported that a deal is near for the banks to fund the buyout at $36 per share instead of the original $39.20.
That pact was announced with fanfare in 2006 and approved by Clear Channel shareholders in September.
However, since the original deal, the financial world was hit by the subprime mortgage crisis, which spread to the general credit markets. The Citigroup bank consortium balked and asked to renegotiate terms.
The buyers refused and sued in Texas and New York to enforce the contract. They rejected an offer of binding arbitration to settle the dispute. Clear Channel joined the Texas litigation.
The banks — which in addition to Citigroup are Morgan Stanley, Credit Suisse, Royal Bank of Scotland, Deutsche Bank and Wachovia — have tried twice, unsuccessfully, to get the court in Bexar County, Texas, to dismiss the suit, which is set to go to trial June 2.
The deal was controversial early on, even before the current tussle, as some protested that it favored the Mays family controlling stockholders over small shareholders.
Analysts say that one key to the possible settlement may be the improving credit markets, which have loosened a bit over the past six weeks.