Banks Defend Clear Channel Funding Effort

The six banks accused of reneging on the funding of the $19.4 billion Clear Channel Communications Inc. deal laid out their defense in a court filing Monday, accusing buyout firms Thomas H. Lee Partners LP and Bain Capital Partners LLC of blindsiding them with a lawsuit while they were in the middle of negotiating the deal.

In a statement, the banks said they “stand ready to honor the Commitment Letter and reach a funding agreement on mutually agreeable terms.”

Bain and THL Wednesday filed lawsuits in New York State Supreme Court and Bexar County, Texas, accusing the banks of illegally balking at their obligation to fund the deal. Clear Channel joined the Texas suit. Late that day, a Texas judge granted a temporary restraining order directing the lending group not to “interfere with or thwart” the deal’s consummation.

In their latest filing, the six lenders — Citigroup Inc., Morgan Stanley, Credit Suisse Group, Royal Bank of Scotland Group PLC, Deutsche Bank AG and Wachovia Corp. — claimed New York law doesn’t permit the buyout firms to get a court order that would force the banks to immediately provide financing.

The banks’ filing highlights an email sent by Bain and THL last Tuesday evening that said the two firms would send the banks documents that “will reflect further meaningful compromises and will be in fully executable form.” The banks say they got the new documents about noon Wednesday.

“The claim that they were negotiating in good faith and blindsided by the litigation is preposterous, and clearly contradicted by the correspondence record,” a spokesman for the buyout firms said. In a series of memos sent to the banks’ lawyers over the past five weeks, the buyout firms’ lawyers had expressed disappointment over what it felt was the banks’ “unwillingness to engage in negotiations.” March 17, the buyout firms’ lawyers told the banks that one of the financing terms was a “deal killer” and made “the transaction commercially unworkable.”

– By Peter Lattman and Matthew Karnitschnig

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