Banking On Lawsuits
Another Clear Channel Communications buyout is reportedly on the verge of collapse. This time, it’s the conglom’s $1.2 billion sale of its television unit to Providence Equity Partners that’s hit a wall.
Clear Channel itself only recently jumped the last of its buyout hurdles after almost two years of wrangling to be taken private. But the current deal is taking on almost soap opera proportions, with one of the banks involved in the TV deal suing its own client – the private equity firm doing the deal, according to the New York Times.
Providence Equity reportedly cited the deterioration of media business and the economy in general in balking at the $1.2 billion price tag, prompting Clear Channel to file suit against the company. According to the Times, however, the two sides recently worked out a compromise in principle to lower the sale price by $100 million.
But that wasn’t the end of it. In a bombshell move, Wachovia – one of the three banks financing the deal – got cold feet over the deal and sued Providence Equity in a North Carolina state court February 22nd, according to the Times.
Wachovia’s lawsuit claims the new agreement automatically voided the previous one. In the meantime, Goldman Sachs and UBS have committed to finance the new deal, which now calls for Providence Equity to borrow less money but at a higher interest rate, the paper reports.
The case is expected to provide an enlightening peek at the recently strained relationships between "corporate America, Wall Street banks and private equity firms as they try to cope with a worsening economy and stormy credit markets," according to the Times.