Sponsors, banks spar over Clear Channel lawsuits

TH Lee, Bain and their banks, which the buyout firms are suing to force funding of their Clear Channel take-private, are releasing heated statements as the banks seek dismissal of a lawsuit filed in New York and a transfer of a Texas lawsuit from state to federal court.

A consortium of banks being sued by Thomas H Lee Partners and Bain Capital over their $26 billion (€16.5 billion) Clear Channel buyout has asked for one of the court cases to be dismissed and another to move jurisdictions, prompting a flurry of heated public statements between the sponsors and lenders.

Citigroup, Morgan Stanley, Credit Suisse, RBS, Wachovia and Deutsche Bank this afternoon said: “Providing memoranda to the media will not get this deal done nor will filing baseless litigation.”

In an effort to force financing of the deal, the private equity firms are suing the banks in New York's state supreme court and in Texas state court; Clear Channel has joined the sponsors as a plaintiff in the Texas suit, which has already led to a temporary restraining order that effectively demands the banks fund the deal. The banks are currently seeking to move the case to federal Texas court from the state court, which the banks claim is an inappropriate jurisdiction chosen by the plaintiffs because they knew it would be favourable to them.

Yesterday, the bank group requested that the New York suit be dismissed asserting that state law does not permit the ruling of specific performance in a contract to lend money.

The banks said: “If the sponsors truly desire to complete the transaction, there is sufficient time for them to return to the negotiating table to work toward an agreement on final documentation.” The bank group continues to maintain their willingness to honour their obligations as outlined in the commitment letter.

The sponsors replied with a memo issued by law firm Ropes & Gray saying: “You have never responded to our many requests that you substantiate why your proposed terms are consistent with either the commitment letter, sponsor precedent, or your own statements to us, the company and third parties (much less all three).”

In addition to alleging the banks were “pretending to negotiate” for weeks, the sponsors’ memo said: “There is only one fundamental issue that divides us: your changing the agreement to convert a committed seven-and-one-half-year long-term financing into a three-year bridge.” They added that they will not waive any rights or modify existing terms of their agreement.

Both sides have vehemently noted their willingness to litigate.