Clear Channel, banks, buyers in settlement talks

Clear Channel shares jumped $2.87, or 9.6 percent, to $32.87.

The company and its private equity buyers, Bain Capital and Thomas H. Lee Partners, sued a consortium of six banks, accusing them of trying to undermine the deal by changing the terms. That lawsuit is pending in a Texas court, while the equity firms have a separate suit pending against the banks in New York court.

Pretrial hearings in San Antonio and the trial in New York were delayed Monday. The trial before a New York Supreme Court judge was rescheduled to start Tuesday.

San Antonio-based Clear Channel confirmed the postponement in court proceedings was designed to allow the parties to continue settlement talks, though it would not comment on the terms of a possible settlement or whether one was likely.

A spokesman for the banks declined to comment.

The equity firms have been struggling to close the proposed deal, at $39.20 per share, as the credit markets have faltered and the share price has declined on fears the deal wouldn't close.

A busted deal would subject the private equity firms to roughly $500 million in fees. But funding the loan at the original terms would cost the banks $3 billion to $4 billion in write-downs with fewer institutions looking to buy up the debt.

The Wall Street Journal, citing unnamed sources familiar with the deal, reported Monday that the proposed settlement calls for the deal to be re-priced at $36 per share -less than the initial offers rejected by some shareholders as too low.

The buyout of the nation's largest radio station operator and a global powerhouse in outdoor advertising has been tumultuous from the beginning.

Announced initially in November 2006, a group of holdout shareholders twice forced the equity partners to raise their offer and to allow some of them to continue owning a minority stake in the firm.

The delays in reaching financial terms and getting regulatory approval for the deal kept it pending as the credit markets seized up and banks, once eager to fund ever bigger leveraged buyouts, got skittish.

As deadlines approached for the deal to get completed, the equity firms and Clear Channel accused the banks of trying to sink the buyout by changing the loan terms, a charge the banks have denied.

Lawsuits accusing Citigroup Inc., Morgan Stanley, Credit Suisse Group, Wachovia Corp., Deutsche Bank AG and The Royal Bank of Scotland Group PLC of tortious interference were filed in March.

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