PE Firms Ask Banks to Rescue Clear Channel

After failing twice to restructure its debt, private-equity firms THL Partners and Bain Capital that acquired Clear Channel last year, are asking some large banks to help keep the company from defaulting on its loans, reports the New York Post. But sources say these are the same institutions that the firms fought to force the banks to live up to their commitment to fund the buyout.

That means Clear Channel may now default on its highly leveraged $27 billion buyout by year-end or early next year, sources said.The radio giant is in danger of exceeding a loan requirement that its senior debt equal no more than 9.25 times its cash flow.

You might remember that the banks that underwrote the debt -- Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, RBS and Wachovia -- wanted both THL Partners and Bain Capital to walk away from the buyout. But the PE firms forced the banks to issue loans that would be difficult to syndicate. Since then, most of the lenders have since sold their CC debt at discount prices.

The PE firms together own 16 percent of Clear Channel's senior loans, and if the company goes bankrupt, they would likely own a piece of the de-leveraged business, which could turn into a profitable investment, reports the newspaper.

Meanwhile, banking sources told The New York Times "Dealbook" that neither Bain Capital or THL Partners have approached any of the banks to prevent the radio giant from defaulting or with a plan to restructure the company's debt. (10-07-09)