Clear Channel Communications, the object of a $19.5-billion US buyout offer, says bankers involved in the deal are still dragging their feet, even though a Texas judge seemed to say they must lend the needed money.
The situation is being watched from Canada for signs that comparable financing problems might thwart a proposed $52-billion Cdn buyout of phone giant BCE Inc.
BCE Three-month chart
Suspense about funding has kept the market value of BCE shares well below the promised buyout price of $42.75 Cdn.
Apparently pushed lower by the Clear Channel news, BCE closed Friday on the Toronto Stock Exchange at $35.21, down $1.73. It was as low as $34.68 during the day.
In New York, Clear Channel was down 40 cents at $29.20 U.S. after dipping to $27.84, far below the $39.20-a-share buyout price.
Clear Channel three-month chart
Clear Channel, based in San Antonio, Texas, owns 1,100 radio stations in about 300 U.S. markets. It is eager to sell itself to private equity funds run by Bain Capital and Thomas H. Lee Partners and hoped to close the deal by next Monday.
Bain and Lee are ready to go through with it, Clear Channel said in a document filed with the U.S. Securities and Exchange Commission on Friday
But the banks that pledged last year to provide funding - Citigroup, Deutsche Bank, Credit Suisse and Royal Bank of Scotland, among others - are desperate to back out.
Although they are big players, they didn't bank on being stuck with huge buyout loans in a market shaken by the U.S. junk-mortgage disaster and other credit problems.
They stand to lose billions because such loans now trade at sharp discounts. They would end up with assets worth less than they lent.
Late Wednesday, District Court Judge John Gabriel of Bexar County, Texas, issued a temporary restraining order that said the banks must not "interfere with or thwart consummation" of the deal by refusing to fund it.
At a meeting on Thursday, however, officials of Bain and Lee said they could not proceed "due to the failure of the banks to provide the required financing," Clear Channel said in the SEC filing.
It did not elaborate on that failure, except to say that the bankers skipped the meeting.
Bloomberg News reported Friday that the banks want the case moved to a federal court that might be more sympathetic to them.
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