By Jessica Hall 2 hours, 54 minutes ago
PHILADELPHIA (Reuters) -
A New York judge dismissed
counterclaims against Clear Channel Communications Inc on
Friday in a lawsuit over the funding of a $20 billion buyout of
the radio station operator.
Clear Channel joined the buyout firms in the Texas suit,
but was not a plaintiff in the New York case. The banks had
filed several counterclaims against both Clear Channel and the
The judge on Friday dismissed the counterclaims against
Clear Channel, but said the counterclaims against the buyout
firms would continue. The buyout firms must answer those
counterclaims within 10 days, the judge said in the ruling. A
copy of the ruling was obtained by Reuters.
"We are grateful that Justice Freedman sent our case back
to Texas where it belongs," Clear Channel said in a statement.
Clear Channel had agreed to be acquired at the height of
the private equity boom last year. The credit markets has
changed significantly since then, causing the cost of financing
leveraged-loan debt to surge.
The banks were to provide more than $22 billion financing
and earn more than $400 million in fees, but they balked when
the debt markets deteriorated and asked for the terms of the
deal to be changed, according to a copy of one of the suits.
"The banks can have their lawyers churn out as many motions
and briefs as they want, but ultimately this case boils down to
a simple question of right and wrong, and they will face a jury
in Texas to decide that question," Clear Channel said.
The banks include Citigroup Inc, Morgan Stanley, Credit
Suisse Group, Royal Bank of Scotland Group Plc, Deutsche Bank
AG and Wachovia Corp.
"We are happy that the court has ordered that the banks
counterclaims against the sponsors should proceed in New York,"
the banks said in a joint statement.
The buyout firms could not be immediately reached for
New York State Supreme Court Judge Helen Freedman heard an
hour of oral arguments on Thursday. The banks sought to have
Judge Freedman dismiss the lawsuit, arguing they were not yet
in breach of contract according to the commitment letter they
signed with the private equity firms. That commitment does not
expire until June 12.
The banks' attorney argued that, in New York State, there
was no law covering an arbitrary breach of contract and that
the private equity firms' lawsuit was premature.
Mark Hansen, a lawyer for the private equity firms, said
the bankers, "cooked up a set of loan documents that are
nuclear, draconian and punitive" in an attempt to void the
(Reporting by Jessica Hall; Editing by Andre Grenon and
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