The $20 billion leveraged buyout of US radio operator Clear Channel Communications was in jeopardy last night, with banks increasingly reluctant to provide financing, a source familiar with the situation said.
The banks appear unwilling to account for any losses on the loans they agreed to make for the deal, the source said. But the final resolution is unclear, with the private equity buyers still wanting to do a deal, the source added.
If the Clear Channel deal falls apart, it would be the latest in a series of leveraged buyouts (LBOs) that have failed since the credit crisis began last year.
It would leave a handful on the table still, such as the $6.1 billion buyout of Penn National Gaming and the $34.1 billion buyout of Canada's biggest telecom company BCE.
Clear Channel struck the deal last year to be bought by private equity firms Thomas H. Lee Partners and Bain Capital Partners LLC for $39.20 a share. But the market has changed since then and its stock has for months traded significantly below the offer price amid concerns about the deal.
Its shares fell 21 per cent to $25.70 after-hours last night after falling 5.6 percent in the regular session on the New York Stock Exchange, a sign traders felt the deal was doomed.
Banks that agreed to finance the deal are Citigroup, Morgan Stanley, Deutsche Bank AG, Credit Suisse Group, Wachovia Corp, and Royal Bank of Scotland Group.
Danielle Romero-Apsilos, a spokeswoman for Citigroup, declined to comment. Spokespeople from Credit Suisse, Deutsche Bank, Morgan Stanley and Wachovia referred questions to Citigroup. Royal Bank of Scotland Group was not immediately available for comment.
A spokeswoman for Clear Channel said the company had no immediate comment. The company has previously said it expects the deal to close by March 31th. If the deal does fall apart, it could follow others such as United Rentals into litigation.