Keeping the closing table ready


With lawsuits flying, Clear Channel Communications has again extended its bond tenders so that they can close, if and when a group of banks comes to the closing table with over 22 billion bucks in financing for the 26.7 billion bucks buyout. The new expiration date for the bond tenders, if it means anything, is April 11th. Clear Channel notes that it has sued the banks to enforce their commitment to provide funding and that it intends to complete the tender offers upon consummation of the buyout.

There was the tiniest glimmer of hope for a resolution with the would-be buyers, Thomas H. Lee Partners and Bain Capital, saying in a letter that they have only one major sticking point with the banks. According to Bloomberg, which says it received a copy of the letter, the private equity firms say that issue is the attempt by the banks to change the financing period from the originally proposed seven and a half years to a three-year bridge loan. That letter came after the banks insisted that they were still willing to negotiate terms to go to closing.

Just how much cash is at stake? Based on the commitment letter, which called for three levels of financing, here’s a look at how much each of the banks was supposed to put up:

Clear Channel buyout funding

Bank % share Senior secured Receivables Senior bridge Total
Citigroup 18.750% $3,473,437,500 $187,500,000 $487,500,000 $4,148,437,500
Morgan Stanley 18.750% $3,473,437,500 $187,500,000 $487,500,000 $4,148,437,500
Deutsche Bank 18.750% $3,473,437,500 $187,500,000 $487,500,000 $4,148,437,500
Wachovia 14.584% $2,701,686,000 $145,840,000 $379,184,000 $3,226,710,000
Credit Suisse 14.583% $2,701,500,750 $145,830,000 $379,158,000 $3,226,488,750
Royal Bank of Scot. 14.583% $2,701,500,750 $145,830,000 $379,158,000 $3,226,488,750
Totals 100.000% $18,525,000,000 $1,000,000,000 $2,600,000,000 $22,125,000,000

RBR/TVBR observation: If those numbers have more digits that anything ever entered in your checkbook, remember that this was, back in early 2007, business as usual for the banks. They can deliver the 22.125 billion. The problem is that they will immediately have to write-down the value of those loans by about 15% to reflect the current, lousy credit market. You can apply that 15% to the total for each bank to see what the impact would be. To be sure, it would be a lot more in each case than their share of about 400 million in fees for financing the deal.

"We feel your pain" is essentially what Clear Channel, TH Lee and Bain have said to the banks, but a deal is a deal. Now pay up. With nearly three billion at stake, the banks can afford to pay squadrons of lawyers to fight tooth and nail to keep them from having to take those write-downs.