The
final impasse between Bain Capital LLC and Thomas H. Lee Partners LP and their bankers over the $26 billion buyout of Clear Channel Communications Inc. wasn't about LIBOR floors or minutiae of the financing agreements. It was the lenders' refusal to allow Clear Channel to draw on part of the $22.1 billion buyout financing package if necessary to refinance roughly $4 billion of outstanding bonds when they begin to come due in three years, according to a suit filed by the buyers late Wednesday.
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It was a dealbreaker from the buyers' standpoint, and the banks knew that, one source familiar with the talks said. The buyers contend that the banks' position ran counter to standard practice and to the language of the financing agreements.
Clear Channel and the buyers announced after the market closed Wednesday that they had brought three suits against the Citibank-led lending syndicate.
Famous Texas trial lawyer Joe Jamail is the lead lawyer on a suit by Clear Channel and the private equity firms' acquisition vehicle filed in Bexar Country, Texas, where the plaintiffs allege that the bankers tortiously interfered with the buyout agreement. The radio and billboard company alleges that the banks are trying to "run out the clock" so the buyout collapses. Jamail won a $10 billion verdict for Pennzoil in a tortious interference suit in 1985 against Texaco Inc., which had trumped a deal Pennzoil had to buy Getty Oil Co. in 1984. The award forced Texaco into bankruptcy.
The buyers, meanwhile, brought twin suits in state court in New York City alleging that the banks have breached their loan commitment agreements. Those include claims for breach of contract, fraud and unfair business practices. They ask the court for specific performance -- an order compelling the banks to fund the buyout. One suit targets only Deutsche Bank AG, while the other names the rest of the lenders.
The lenders were Citigroup Global Markets Inc., Deutsche, Credit Suisse Securities LLC, Morgan Stanley, Wachovia Bank and Royal Bank of Scotland plc.
The banks issued a joint statement through Citi late Wednesday saying they had "presented the sponsors with credit agreements fully consistent and compliant with the [debt] commitment letter," adding that the syndicate "has been and remains prepared to honor the obligations as set forth in that letter. We believe the suits are without merit and will contest them vigorously." - John E. Morris, David Carey and Chris Nolter
See TheDeal.com story about the Clear Channel lawsuit
See press release from Clear Channel buyout sponsors (pdf)
See the Texas court complaint filing against the banks (pdf)
See the New York court complaint filing against the banks (pdf)
See the New York court complaint filing against Deutsche Bank (pdf)
See Dealwatch: Clear Channel
