A court order has been issued ordering the banks involved in funding the USD19.4bn takeover of Clear Channel not to interfere with the deal closure. The temporary restraining order was granted to Clear Channel, as part of a legal action launched with buyers Bain Capital and Thomas H. Lee Partners.
The news confounds this week’s rumours that the deal is on the verge of collapse because of a lack of agreement on credit terms.
The ruling effectively compels the banks, which agreed to finance the deal prior to the current slump in the market, to issue the payment. These banks are Citigroup, Morgan Stanley, Deutsche Bank, Credit Suisse, RBS and Wachovia, who are expected to oppose the ruling.
On Wed, Thomas H. Lee and Bain Capital launched two lawsuits claiming the banks have failed to follow their obligations, reports Dow Jones. One suit, filed in New York alleges breach of contract and fraud. The second, filed in Texas with Clear Channel joining as fellow complainants, claims the banks interfered with the merger and should pay USD26bn in damages.
Texas District Court Judge John Gabriel made a temporary ruling in favour of Clear Channel, stating that the banks must not “interfere or thwart” the deal by refusing to fund the transaction. Responding to the ruling Clear Channel said: “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.”
Negotiations between Thomas Lee, Bain and Clear Channel started in Nov 2006, with an eventual buy-out price agreed at USD39 per share. In Jan the deal won the approval of the US Justice Department.