Investors in Clear Channel Communications saw a bit of green in after hours trading today. The news that brought investors back into the equity was that the private equity groups that proposed the buyout are now suing the lenders that had agreed to back the deal.
It has been alleged that the banks began to balk at financing the deal when debt markets took a turn for the worse. Bain Capital Partners and Thomas H. Lee Partners stated in their suit that the lenders tried to change the terms of the deal. The two private equity firms are seeking the courts help to force the lenders to agree to the terms of the deal. Clear Channel themselves has also joined in the litigation.
Named in the suit are CITI, Morgan Stanley, Credit Suisse, Royal Bank of Scotland, Deutsche Bank, and Wachovia.
A Citigroup spokeswoman said the suits were without merit and they would contest them vigorously.
"The Bank Group presented the Sponsors (THL and Bain) with credit agreements fully consistent and compliant with the Commitment Letter," the spokeswoman wrote. "The Bank Group has been and remains prepared to honor the obligations as set forth in that Letter."
The lending institutions noted that they stood to lose billions on the deal. Whether it was the markets or something else that made the deal get cold feet will likely come out during the proceedings in the near future.
The news that the buyout firms were still pursuing the deal sent CCU up $2.00 to close at $29.00 in after hours trading Wednesday.
One thing is certain, CCU is now embroiled in a litigation battle, and it could be some time before the issue plays out. This effectively may cause Clear Channel to trade in a channel for some time.
Position - No Position Clear Channel, banking with CITI, unrelated business with Morgan Stanley