Judge rules on Clear Channel buyout

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RELATED: Legal action filed in Clear Channel buyout

Clear Channel Communications and the private-equity firms that want to buy the company were claiming a legal victory Thursday after a judge on late Wednesday temporarily barred banks that promised to finance the deal from changing their minds.

In the 16 months since Thomas H. Lee Partners and Bain Capital Partners agreed to pay $19 billion for the radio giant, Wall Street has doubted that the buyout would ever happen given the deteriorated state of credit markets.

Clear Channel stock dropped 17% on Wednesday after it was learned the parties had filed legal actions against the six banks that they allege were stalling the deal, but the stock leapt 10% on Thursday on news of the restraining order on the banks.

The stock ended trading Thursday at $29.60, though, still 25% under the $39.20 per-share price that Bain and Lee have agreed to pay, suggesting that plenty of investors still have doubts.

Judge John Gabriel of Bexar County, Texas, ordered that the banks -- Citigroup Global Markets, Deutsche Bank, Morgan Stanley, Credit Suisse, Royal Bank of Scotland and Wachovia -- "not interfere with or thwart consummation of the merger agreement."

He also agreed with Clear Channel's claim that irreparable harm would result "if the banks were not immediately enjoined from tortiously interfering with the merger agreement."

The banks can still back out if they can prove that Clear Channel's business has gone sufficiently south since the buyout deal was struck in December 2006.

The banks will be able to make their case April 8 at a hearing ordered by Gabriel. The potential lenders are trying to move the case to a federal court.

"In our long histories, we have only used litigation as a last resort," Bain and Lee said Thursday. "We regret the banks have left us no choice but to notify them that they are in breach of their obligations under their financing commitments."
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