Clear Channel, buyers say banks reneged

SAN ANTONIO —  Clear Channel Communications Inc. and the private equity firms seeking to close a $19.5-billion purchase of the company sued the banks committed to backing the deal Wednesday.

In lawsuits filed in Texas and New York, Clear Channel and the buyers group, led by Bain Capital and Thomas H. Lee Partners, claimed that the six banks that promised to finance the deal were reneging on the agreement to provide long-term financing, looking to offer little more than a short-term bridge loan.

“The lenders agreed to provide long-term financing,” said Alex Stanton, a Bain spokesman. “They now have lenders’ remorse because the credit markets have been difficult.”

The lenders -- Citigroup Inc., Morgan Stanley, Credit Suisse Group, Royal Bank of Scotland, Deutsche Bank and Wachovia Corp. -- signed commitments when the deal was inked 18 months ago saying they would bear all the risk in changes to the debt market climate.

In that time, the credit market has seized up, making it much more difficult for the banks to resell the loans, so instead of sticking with the minimum six years of financing, the lenders had sought to provide only a short-term three-year loan, the equity firms said.

“The financing package they are trying to convert to is unprecedented,” Stanton said. “This kind of financing is sort of the equivalent of you going to buy a house with a 30-year fixed mortgage and someone presents you with a three-year ARM.”

The banks issued a statement denying that they failed to make good on their earlier commitment.

The deal was scheduled to close by Monday.