PHILADELPHIA (Reuters) - A New York judge dismissed counterclaims against Clear Channel Communications Inc <CCU.N> on Friday in a lawsuit over the funding of a $20 billion buyout of the radio station operator.
By Jessica Hall
PHILADELPHIA (Reuters) - A New York judge dismissed counterclaims against Clear Channel Communications Inc <CCU.N> on Friday in a lawsuit over the funding of a $20 billion buyout of the radio station operator.
The private equity buyers -- Thomas H. Lee Partners and Bain Capital Partners, had sued a group of banks in New York and Texas courts -- seeking to force them to fund the deal.
Clear Channel joined the buyout firms in the Texas suit, but was not a plaintiff in the New York case. The banks had filed several counterclaims against both Clear Channel and the buyout firms.
!ADVERTISEMENT!The judge on Friday dismissed the counterclaims against Clear Channel, but said the counterclaims against the buyout firms would continue. The buyout firms must answer those counterclaims within 10 days, the judge said in the ruling. A copy of the ruling was obtained by Reuters.
"We are grateful that Justice Freedman sent our case back to Texas where it belongs," Clear Channel said in a statement.
Clear Channel had agreed to be acquired at the height of the private equity boom last year. The credit markets has changed significantly since then, causing the cost of financing leveraged-loan debt to surge.
The banks were to provide more than $22 billion financing and earn more than $400 million in fees, but they balked when the debt markets deteriorated and asked for the terms of the deal to be changed, according to a copy of one of the suits.
"The banks can have their lawyers churn out as many motions and briefs as they want, but ultimately this case boils down to a simple question of right and wrong, and they will face a jury in Texas to decide that question," Clear Channel said.
The banks include Citigroup Inc <C.N>, Morgan Stanley <MS.N>, Credit Suisse Group <CSGN.VX>, Royal Bank of Scotland Group Plc <RBS.L>, Deutsche Bank AG <DBKGn.DE> and Wachovia Corp <WB.N>.
"We are happy that the court has ordered that the banks counterclaims against the sponsors should proceed in New York," the banks said in a joint statement.
The buyout firms could not be immediately reached for comment.
New York State Supreme Court Judge Helen Freedman heard an hour of oral arguments on Thursday. The banks sought to have Judge Freedman dismiss the lawsuit, arguing they were not yet in breach of contract according to the commitment letter they signed with the private equity firms. That commitment does not expire until June 12.
The banks' attorney argued that, in New York State, there was no law covering an arbitrary breach of contract and that the private equity firms' lawsuit was premature.
Mark Hansen, a lawyer for the private equity firms, said the bankers, "cooked up a set of loan documents that are nuclear, draconian and punitive" in an attempt to void the funding contract.
(Reporting by Jessica Hall; Editing by Andre Grenon and Carol Bishopric)
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