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Clear Channel Says Privatization Deal to Close Amid Restraining Order, Lawsuits

A Texas judge has given the broadcaster a temporary restraining order in their favor.

Reports this week that Clear Channel Communications’ buyout deal to go private was in trouble morphed into news of private-equity firms Thomas Lee Partners and Bain Capital Partners filing lawsuits against several banks to force the lenders to fund the $19.4 billion deal.

Clear Channel then announced a Texas judge has given the broadcaster a temporary restraining order in their favor.

District Court Judge John Gabriel of Bexar County “recognized the importance of the banks’ agreement and duty to provide debt financing to the merger,” according to Clear Channel.

Gabriel ordered that the banks cannot prevent the deal from going through “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,” Clear Channel announced.

The broadcaster said it expected to move quickly to complete the loan documents and the transaction.

In suits filed before receiving the restraining order, the private-equity firms alleged breach of contract and fraud, claiming that the banks — Citigroup, Morgan Stanley, Credit Suisse, the Royal Bank of Scotland, Deutsche Bank and Wachovia — had broken their commitment to fund the deal.

Clear Channel joined one of the lawsuits, which came after disputes over the financing terms threaten to scuttle the transaction days before it was slated to close.

The Wall Street Journal reports the banks face taking a hit of nearly $3 billion if the deal goes through because the credit-market turmoil has made it difficult for them to package leveraged debt and sell to investors; such debt typically has been marked down recently.