Clear Channel deal in danger
A sale of the nation's largest radio broadcaster to private equity conceived in very different times may not survive turmoil in the credit markets.
NEW YORK (Fortune) -- Clear Channel's long-awaited $19 billion sale to private equity firms Bain Capital and Thomas H. Lee Partners is in danger of falling through, according to a Wall Street Journal report.
The transaction is due to close this week. But many observers have been speculating that the deal is in jeopardy of falling through for a host of reasons, including the turmoil in the financial markets and the poor outlook for media companies.
The sale of the nation's largest radio broadcaster was first announced in November of 2006, in a very different financial climate. Credit was easy to obtain and radio broadcasters had better prospects. The $39.20 per share that private equity firms agreed to pay then seemed like a fair price. But Tuesday, Clear Channel's (CCU, Fortune 500) shares were trading around around $32, and dropped another 20% after hours.
The banks who have committed to collectively finance about $22 billion of the transaction - Citigroup Global Markets Inc., Credit Suisse Securities LLC, Deutsche Bank Securities Inc., Royal Bank of Scotland and Wachovia Bank - are now operating in a tight credit market.
According to the Wall Street Journal, the private equity duo and their lenders are struggling over the details of the financing agreement. The Wall Street Journal's report corroborates recent rumors that the lending institutions are getting cold feet.
"The banks are on the hook for $22 billion. It's hard to see them selling this kind of leveraged debt in this market," says Richard Dorfman, managing director of Richard Alan Inc., an investment firm focusing on media and information industry. "This has nothing to do with anyone's bad intentions or the viability of Clear Channel. It's purely the problems inherent in the debt world today." 
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