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), Morgan Stanley (MS.N), Credit Suisse Group (CSGN.VX), Royal Bank of Scotland Group Plc (RBS.L), Deutsche Bank AG (DBKGn.DE) and Wachovia Corp WB.N 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.
A spokesman for the banks said in an e-mailed statement: "We are pleased with today's outcome and hope through the claims that we will be filing tomorrow and our request for an expedited hearing in New York, which includes all relevant parties we can bring this matter to a rapid resolution."
"The bank group remains willing to discuss a funding agreement consistent with the terms of the Commitment Letter."
The private equity firms are seeking "specific performance" of a commitment letter that details the plans to fund the deal. Specific performance is when one party asks a judge to order another party to stick to a contract.
The banks have argued New York courts hold that, except in cases involving real property, a party may not secure specific performance of a contract to lend money. They also argue the letter calls for them to lend money pursuant to documents that are to be negotiated later. They argue the two sides were in talks when the buyers sued.
In an e-mailed statement, a spokeswoman for Clear Channel said: "The banks' latest attempt to forum shop is a clear abuse of the judicial system. They have no right to drag our case up to New York. That suit relates to a contract we are not even a party to. The suggestion defies credulity."
A spokesman for Bain and Thomas H. Lee said in a statement: "We are very pleased with the court's decision to address this matter on an urgent basis. We want to complete the deal to buy Clear Channel and look forward to pressing our case that the banks must be forced to live up to their binding commitments to fund the transaction."
Interest in the case is high and a long line of people that included arbitrage traders wound around the courtroom before the hearing started on Thursday, trying to pack into the room.
Clear Channel's shares closed up 13 cents at $28.37, significantly below the $39.20 the private equity firms are offering.
Justice Freedman after the hearing on Thursday signed an order noting the trial will begin on May 5 at 9.30 am and also that a pretrial conference will be held on May 2. The schedule also calls for the parties to submit a list of deposition designations and an estimate of the length of the trial by April 25. (Reporting by Megan Davies; Editing by Tim Dobbyn/Andre Grenon)
