Battling continues over which court, if any, should determine whether six big banks have to step up to the plate and finance the 26.7 billion bucks buyout of Clear Channel Communications. The banks have asked a New York court to toss a lawsuit by the would-be buyers, Thomas H. Lee Partners and Bain Capital. And, as reported yesterday by RBR/TVBR, Clear Channel is trying to turn back an attempt by the banks to move another lawsuit from the Texas courts to federal court.
The New York case doesn’t include Clear Channel directly. Rather, the lawsuit was brought against five of the six banks by companies created by TH Lee and Bain to hold stakes in CC Media, which has the deal pending to acquire Clear Channel. The lawsuit charges that the banks have tried to squirm out of their agreement to finance the deal.
“Despite having made a commitment that was not subject to any market conditionality, the Banks have balked at their obligations due to a simple case of lenders’ remourse. As conditions in the credit markets worsened in mid-2007 – and as the potential losses to the Banks from the financing they had agreed to provide began to outstrip the huge fees the Banks expected to earn – the Banks plotted to shift losses to the Purchasers or to escape their commitment,” the lawsuit charges. The private equity firms claim the banks even threatened to disrupt financing for a separate transaction to try to force concessions in the Clear Channel financing. Having been rebuffed in those efforts, the private equity firms charge that the banks are now trying to change the terms from those they had committed to. The New York suit charges the banks with breach of contract and fraud.
The banks, of course, have a different story. They insist that they were still negotiating in good faith when, low and behold, they found themselves being sued. They’ve asked the New York court to dismiss that lawsuit and, should that not happen, they are also fighting a request by the private equity firms for an expedited hearing.
RBR/TVBR observation: No doubt there will be legal maneuvering on an almost daily basis. It seems to us the key development to watch for is whether the federal judge in San Antonio acts quickly on the attempt by Clear Channel to have its lawsuit against the banks returned to the Texas state courts, where a judge had already issued a temporary restraining order against the banks (3/27/08 RBR #61). If the ball is knocked back into the court of that fast-moving judge, the hearing he has scheduled for April 8th could bring this to a quick conclusion. Don’t bet on it happening.