Clear Channel Communications ccu said Thursday that a Texas judge has issued an order barring banks from taking steps that would "interfere or thwart" the closing of the proposed $19.5 billion buyout of the nation's biggest radio station operator.
Clear Channel shares jumped.
The No. 1 radio company and its equity partners, Bain Capital and Thomas H. Lee Partners, on Wednesday sued the bank consortium lined up to finance the deal after they failed to reach agreement on terms.
"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 company had hoped to complete the deal this month.
"It seems clear that lenders' remorse set in when credit markets worsened," Bain and Lee said in a statement before the ruling. "Now, they are trying to walk away from their commitment letter, which clearly states that they bear all the risk that conditions in the debt markets might change."
Clear Channel, in Texas state court, charged Citigroup, Morgan Stanley, Credit Suisse, RBS, Wachovia and Deutsche Bank with engaging in "tortious interference" with the deal. The equity firms are suing in New York's Supreme Court for breach of contract. The plaintiffs are asking for unspecified damages that could exceed the $26 billion total cost of the deal.
Clear Channel, also a major billboard operator, said in a statement that Bexar County state District Judge John Gabriel issued a temporary restraining order in its favor, saying that "irreparable harm" would result if the banks backing the company's buyout deal were not immediately prevented from interfering with its closing.
The judge ordered that the banks must not "interfere with or thwart" the closing of the deal by refusing to finance the transaction, insisting on terms that are inconsistent with the commitment letter or refusing to act in good faith in drafting the loan documents.
The pact expires June 12. If it collapses, Clear Channel is entitled to a termination fee of up to $600 million.
Clear Channel shareholders likely will be the big losers if there's no resolution.
The deal, struck in late 2006, first called for them to get $37.60 a share, and the last offer of $39.20 is what gave the deal a $19.5 billion price tag.
"There's no way that $37.60 would be today's price," says Sanford C. Bernstein analyst Michael Nathanson. "In a slowing economy with fears of recession, you'll have weak ad growth. And the (radio) business is losing ad dollars to other media," including the Internet.
Clear Channel shares fell 17%, to $26.92, on Wednesday after The Wall Street Journal reported the deal was in jeopardy. The stock rebounded 8% in after-hours trading on news of the lawsuits.
Bain and Lee say that the banks tried to lessen the risk that they might be unable to syndicate the $22 billion they had committed to the deal. They insisted on offering bridge financing for only three years, not the six they had originally committed.