UPDATE 1-Clear Channel dispute set for May trial

(Adds comments from banks, Clear Channel and Bain/Lee; shares; details from scheduling order; background; byline)

By Megan Davies

NEW YORK, April 3 (Reuters) - The dispute over the $20 billion leveraged buyout of U.S. radio operator Clear Channel Communications Inc CCU.N will go to trial in New York on May 5, or as soon after as can be scheduled, Justice Helen Freedman said in New York Supreme Court on Thursday.

The buyout has been rocked by a dispute between the banks set to finance the deal and the private equity buyers, Thomas H. Lee and Bain Capital.

The buyout firms claim the banks balked at providing financing when the debt markets deteriorated and asked for a change in terms of the buyout that prevented it from being completed. The banks were to have earned more than $400 million in fees.

The private equity firms filed complaints in New York and Texas last week against Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), Credit Suisse Group (CSGN.VX: Quote, Profile, Research, Stock Buzz), Royal Bank of Scotland Group Plc (RBS.L: Quote, Profile, Research, Stock Buzz), Deutsche Bank AG (DBKGn.DE: Quote, Profile, Research, Stock Buzz) and Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) to force them to fund the deal.

Clear Channel joined them in the Texas suit, but is not a plaintiff named in the New York case.

The banks said in court Thursday they want to bring Clear Channel into the lawsuit brought against them in New York.

A lawyer for the banks, Guy Struve, from Davis Polk & Wardwell, told a hearing they planned to file an answer to the suit and counter claims on Friday that would add Clear Channel to the case in New York.