Clear Channel Communications has six big banks on the ropes again. A state court judge in New York on Friday rejected a move by the banks to drag Clear Channel into their legal battling with two private equity firms in the New York courts. That keeps the main legal wrangling in Texas, where Clear Channel has sued the banks for more than 26 billion bucks for failing to fund the pending going-private buyout.
After hearing arguments earlier in the week, Judge Helen Freedman on Friday dismissed the banks’ countersuit against Clear Channel Communications and CC Media Holdings, the latter being the company created to acquire Clear Channel. She ruled that the two entities, who are suing the banks in Texas, “are strangers to the commitment letter and are not bound by any of its terms,” leaving the Texas courts as the proper venue for their dispute with the banks. The banks had argued, unsuccessfully, that Clear Channel and CC Media were bound by the terms of their loan commitment letter with Bain Capital and Thomas H. Lee Partners, which specified that any legal disputes had to be settled in the New York courts. All the banks got out of Friday’s decision was permission from Judge Freedman to pursue their counterclaims against Bain and TH Lee, who had sued the banks in the New York courts.
The Texas Supreme Court has thus far ignored an “emergency motion” from the banks to put the Texas case on hold. As it stands, the lawsuit seeking over $26 billion in damages from the banks is set to go to trial June 2nd before Judge Joe Frazier Brown in San Antonio, so it could be wrapped up before the June 12th drop dead date for the Clear Channel buyout.
RBR/TVBR observation: The banks aren’t doing so well. They haven’t won a major decision yet in any court – Texas, federal or New York. The pressure is on for the banks to find a way to settle and cap their losses. That 26 billion-plus in damages is looking more and more like a real possibility.
Say what you will about how the Mays boys run radio stations, but they sure do know how to hire good lawyers. Having lost in the courts at every turn, the banks are running out of options – except for coming up with $22 billion to finance the buyout and take their write-downs resulting from the bad market for reselling corporate debt.