Clear Channel Buyout Edging Towards Collapse

The planned buyout of Clear Channel Communications appears to be falling apart, according to various sources and reports Tuesday.

In late February, a source close to the buyout negotiations pointed Digital Music News to a cooling deal.  A flurry of reports now suggest that the near-$20 billion acquisition is edging towards collapse, thanks to tightening credit markets and reluctant lenders.

The private equity buyers, Thomas H. Lee Partners and Bain Capital, originally agreed to purchase the massive conglomerate at $39.20 a share.  But investors recently pushed valuations towards $25, partly in reaction to a Wall Street Journal article that detailed the souring negotiations.

Still, per-share pricing is not the biggest sticking point, according to the original source.  “They are not quibbling over the share price, they are quibbling over whether anyone will buy the bonds in first place,” the source said, pointing to reluctance by institutional investors to purchase repacked bonds related to the leveraged buyout.

Meanwhile, legal considerations may be preventing various banks from stepping away immediately.  “Despite worldwide de-leveraging, this could be actionable,” the source noted, alluding to possible lawsuits ahead.  That was echoed by both the Journal and the New York Times, which reported that lawsuits from Clear Channel and the private equity firms may be imminent.