We admit it, the white-knuckle courtroom battle of banks vs. private-equity has us on the edge of our seats like a high-tension Venus vs. Serena Williams match. Let’s be honest: this puts dross like Judge Judy to shame. Compared with these guys sparring over the fine print, the “preposterous” claims, the bad faith, the unfulfilled promises and now, our favorite, the banks’ supposed “run-out-the-clock strategy,” everything else is subpar. We’ve even ditched our daytime stories. That said, you do have to work at keeping up – so don’t miss today’s installment.

Clear Channel’s bankers have asked a New York judge to dismiss a lawsuit that has been brought by Bain Capital and Thomas H. Lee, claiming that they were not obliged to provide financing for a $19bn buy-out of the media group because the parties had not yet finalised the terms of a funding agreement.

The banks, led by Citigroup, also tried to refute the central contention by Bain, THL and Clear Channel that they had reneged on the deal in order to avoid more than $3bn in losses.

Instead, the banks claimed that they had been negotiating in good faith last week to close the deal when the private equity firms involved surprised them by filing suits in Texas and New York. “Unlike the sponsors, we have consistently negotiated the open items in good faith and in fact were still doing so when without warning the sponsors took the unproductive step of asking a court to intercede in our discussions,” they said on Monday.

The legal filing and accompanying statement represent the first detailed response from the banks, which include Deutsche Bank, Morgan Stanley, Credit Suisse, Wachovia and RBS, since Clear Channel and its partners filed the suit.

In essence, both sides are claiming the other was negotiating in bad faith in an effort to scupper a deal that was hatched in better times and had lost its lustre as credit markets deteriorated.

Each side is trying to pin the blame for the deal’s collapse on the other in order to avoid as much as $600m in break-up fees, as well as the damage to their reputation for having undermined such a high-profile transaction.

At the heart of the legal dispute is whether or not the two sides had reached a binding agreement on more than $22bn in financing that was needed to close the deal.

Clear Channel, Bain and THL have maintained there was an agreement.

Last week, they won a temporary restraining order from a Texas judge, which would force the banks to fulfil their obligations.

However, the banks argued in their motion on Monday that a commitment letter they agreed to with the private equity firms still had a number of substantive points to be hashed out.

“The parties acknowledged in the commitment letter that there were terms and conditions of the financing that were left to be negotiated,” the motion read.

The banks involved have also argued that New York law does not generally allow the courts to order banks to fund loans that are disputed.

In a statement Monday night, Bain and THL called the banks’ claims “preposterous” and said the motion to dismiss the suit was part of a broader “run-out-the-clock strategy” intended to undermine the deal.

Continue reading at FT.com

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