E-Commerce News: Deals: Clear Channel Plunges on Word of Deal Disintegration

Because the Clear Channel stock has been trading below the buyout value, the lenders face the prospect of lending far more than the current market value of the company at a time when banks are already nervous about making loans. Failure to make good on previous lending commitments, however, could subject the banks to lawsuits.

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The proposed US$19.5 billion buyout of radio station operator Clear Channel Communications is reportedly near collapse because the private equity firms leading the deal are having trouble nailing down a financing agreement with banks.

Shares of Clear Channel, the largest radio station operator in the United States, fell $5.86, or almost 18 percent, to $26.80 in morning trading Wednesday after dropping 5.5 percent a day earlier. The shares are well below the $39.20 per share the buyout firms offered Clear Channel shareholders.

The Wall Street Journal reported on its Web site Tuesday that the private equity firms leading the buyout were having difficulty reaching terms with the banks committed to financing the deal. The report cited unidentified people familiar with the matter.

Working Out Issues

The buyout deal, which has been plagued by delays since it was announced in November 2006, was scheduled to close March 31.

A person familiar with the situation told The Associated Press that the equity partners, led by Thomas H. Lee and Bain Capital Partners, are prepared to fulfill their obligation to fund and close the deal.

Some issues were still being worked out, said the person, who asked not to be named because of not being authorized to speak publicly about it.

Because the stock has been trading below the buyout value, the lenders face the prospect of lending far more than the current market value of the company at a time when banks are already nervous about making loans. Failure to make good on previous lending commitments, however, could subject the banks to lawsuits.

The Largest Pending Buyout

The New York Times, also citing unidentified people briefed on the negotiations, said in Wednesday's editions that San Antonio-based Clear Channel and the private equity buyers may go to court to force the banks to complete the buyout.

Bain Capital said its executives were not commenting Tuesday. A call to a THL spokesperson was not immediately returned, and Clear Channel referred calls to the equity partners.

The deal was struck during the years of easy credit that preceded the current crunch that is pressuring the U.S. market. The Clear Channel buyout remains the largest pending buyout in the U.S., according to Dealogic.

In addition to its radio holdings, Clear Channel is a major billboard company with roughly 1 million signs worldwide.