UPDATE 2-Clear Channel buyout in trouble - source

(Adds background about other deals to close, quote from analyst and lawyer, background about deal financing, history of deal)

By Megan Davies

NEW YORK, March 25 (Reuters) - The $20 billion leveraged buyout of U.S. radio operator Clear Channel Communications Inc (CCU.N: Quote, Profile, Research, Stock Buzz) 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 (LBOs) that have failed since the credit crisis began last year. It would leave a handful on the table still, such as the $6.1 billion buyout of Penn National Gaming Inc (PENN.O: Quote, Profile, Research, Stock Buzz) and the $34.1 billion buyout of Canada's biggest telecom company BCE Inc (BCE.TO: Quote, Profile, Research, Stock Buzz).

Clear Channel struck the deal last year to be bought by private equity firms Thomas H. Lee Partners and Bain Capital Partners LLC for $39.20 a share. But the market has changed since then and its stock has for months traded significantly below the offer price amid concerns about the deal.

Its shares fell 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 traders felt the deal was doomed.

"If it fell apart, it would be seen as a casualty of the credit crunch as well as the secular and cyclical challenges of the radio industry," said David Bank, analyst with RBC.

Banks that agreed to finance the deal are Citigroup Inc(C.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), Deutsche Bank AG (DBKGn.DE: Quote, Profile, Research, Stock Buzz), Credit Suisse Group (CSGN.VX: Quote, Profile, Research, Stock Buzz), Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz), and Royal Bank of Scotland Group Plc (RBS.L: Quote, Profile, Research, Stock Buzz) .