A Texas judge issued a temporary restraining order barring banks from interfering with or thwarting the closing of the proposed US$19.5 billion buyout of Clear Channel Communications, the nation's largest radio station operator.
The order by Bexar County Judge John D. Gabriel was issued just hours after Clear Channel and the private equity buyers, led by Bain Capital and Thomas H. Lee Partners, filed suit in Texas and New York to force the banks to lend money promised in the deal first proposed 18 months ago.
They accused the banks of putting unreasonable terms on the loan in an effort to bust the deal, violating the commitments they made earlier.
End to Delays
If the deal closes, the banks could take $3 billion to $4 billion in writedowns. They are likely to have trouble reselling the debt in a credit market that has seized up.
The Texas judge found there was evidence Clear Channel and the equity firms will prevail in their case, and "harm is imminent and immediate," justifying the restraining order.
San Antonio-based Clear Channel, which is also a major billboard operator, hoped to complete the deal by Monday. Further delays trigger fees or potentially destroy the buyout altogether.
"We are pleased that the banks and the purchasers will now be able to move quickly to complete the loan documents and fund the merger," Clear Channel said in a statement.
The banks, which include Citigroup, Morgan Stanley, Credit Suisse Group, The Royal Bank of Scotland, Deutsche Bank and Wachovia, declined comment on the order through a Citigroup spokesperson Thursday.
Bump in Share Price
The buyers have agreed to pay $39.20 a share for Clear Channel. The company's shares price has fallen sharply on worries the deal will not be completed, however.
In morning trading, Clear Channel shares rose $3.07, or 11.4 percent, to $29.98 -- but that is still 24 percent below the offered price.
If the equity firms fail to close the deal, they're subject to $500 million to $600 million in breakup fees and have insisted they still want to buy the radio and billboard giant.
Clear Channel has had success before in forcing a deal through legal action. The $1.1 billion sale of its television group closed after the company lowered the price by $100 million and sued Providence Equity Partners, which had been having difficulty getting Wachovia to make good on its earlier financing commitment.
© 2008 Associated Press. All rights reserved.
© 2008 ECT News Network. All rights reserved.
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