Clear Channel continues settlement talks in proposed merger with investors

By Lisa Kerner

Charlotte, N.C., May 12 - Clear Channel Communications, Inc. is continuing settlement discussions with CC Media Holdings, Inc. and the banks issuing debt commitments in connection with the proposed merger of Clear Channel and CC Media.

As a result, pending court proceedings in the matter have been postponed in San Antonio until Tuesday, according to a Clear Channel news release.

There can be no assurance any settlement will be reached, Clear Channel said.

The company had expected to close its merger with CC Media, which is a unit of Thomas H. Lee Partners, LP (THL) and Bain Capital Partners, LLC, in March.

However, the investors were unable to complete the merger due to the failure of the banks to provide the required financing under the banks' binding commitments.

On March 27, Clear Channel announced it was awarded a temporary restraining order by the Texas State Court in its lawsuit against Citigroup, Morgan Stanley, Credit Suisse, the Royal Bank of Scotland, Deutsche Bank and Wachovia to enforce the banks' binding commitments to provide debt financing for the private equity firms' acquisition of the company.

The banks were ordered to not "interfere with or thwart consummation of the merger agreement" by:

• Refusing to fund the merger transaction;

• Insisting on terms that are inconsistent with the commitment letter; or

• Refusing to act in good faith in the drafting of definitive loan documents.

As previously reported, Clear Channel accused the banks of refusing to execute necessary documents in an effort to cause the merger agreement to collapse. In its suit, Clear Channel alleged that the banks' actions created "immeasurable damages exceeding the parties' agreement for $26 billion."

In September, Clear Channel shareholders approved an amended merger agreement with THL and Bain that gives shareholders $39.20 cash per share, as well as an additional per-share consideration if the merger closes after Dec. 31, a prior news release said.

THL and Bain also filed complaints against the banks in the Supreme Court of the State of New York.

According to the equity firms' complaints, the banks committed to provide long-term financing needed to complete the transaction. THL and Bain accused the banks of deliberately reneging on the commitments and attempting to shift the costs of the financing to the sponsors and other shareholders investing in the transaction.

THL and Bain said in a March 26 statement that the banks were trying to derail the transaction by insisting on replacing long-term financing of at least six years with bridge financing of only three years.

The equity firms said it appeared that "lenders' remorse set in when the credits market worsened," a prior news release stated.

Clear Channel, a San Antonio media company, exercised its right to extend the termination date to June 12 from Dec. 12.

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