Home State Judge Awards First Round to Clear Channel

28 March 2008

BEXAR COUNTY, Texas: State District Judge John Gabriel on Thursday issued a temporary restraining order in favor of Texas-headquartered Clear Channel Communications.

He ruled that the sextet of banks, currently trying to welch on a deal to finance the radio company's $19.5 billion (€12.34bn; £9.70bn) private equity buyout, must cease interference with its closure.

Judge Gabriel opined that "irreparable harm" would result if the banks – Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, Royal Bank of Scotland and  Wachovia – were not immediately prevented from further meddling.

Clear Channel, America's largest radio company, declared its delight at the judge's decision: "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."

And private equity duo, Bain Capital and Thomas H Lee Partners, were equally happy. In a joint statement they crowed: "It seems clear that lenders' remorse set in when credit markets worsened.

"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."

The six banks were told by Judge Gabriel that they must not "interfere with or thwart" the closing of the deal by refusing to finance the transaction; or insisting on terms that are inconsistent with the commitment letter; or refusing to act in good faith in drafting the loan documents. 

But the banks are highly unlikely to take the ruling lying down and speculation is rife in Wall Street that they will seek a further judicial hearing outside of Clear Channel's home state.

Analyst Michael Nathanson of Sanford C Bernstein believes the deal's price is way too high in the current economic circumstances.

"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]."

Data sourced from USA Today; additional content by WARC staff