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Clear Channel buyout in trouble
NEW YORK |
NEW YORK (Reuters) - The $20 billion leveraged buyout of U.S. radio operator Clear Channel Communications Inc (CCU.N) was in jeopardy on Tuesday, 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 that have failed since the credit crisis began last year.
Clear Channel struck a deal last year to be bought by private equity firms Thomas H. Lee Partners and Bain Capital Partners LLC for $39.20 a share.
Clear Channel shares plunged 21 percent to $25.70 after-hours on Tuesday after falling 5.6 percent in the regular session on the New York Stock Exchange, a sign the market felt the deal was set to die.
Banks that agreed to finance the deal include Citigroup Inc(C.N), Morgan Stanley (MS.N), Deutsche Bank AG (DBKGn.DE) and Credit Suisse Group (CSGN.VX).
Danielle Romero-Apsilos, a spokeswoman for Citigroup, declined to comment. Spokespeople from Credit Suisse, Deutsche Bank, Morgan Stanley and Wachovia Corp WB.N referred questions to Citigroup. A spokesperson at Royal Bank of Scotland Group Plc (RBS.L) was not immediately available for comment.
A spokeswoman for Clear Channel said the company had no immediate comment.
Banks have to record decreases in the market value of loans in their income statements in a process known as "marking to market." Any declines in the market value of these loans could cut into bank earnings and, in the worst case scenario, cut into capital levels.
Banks are increasingly reluctant to take on credit risk because their balance sheets are strained by subprime mortgages, collateralized debt obligations and other forms of debt that are performing much worse than expected.
(Additional reporting by Michele Gershberg and Dan Wilchins; Editing by Andre Grenon)
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