Friday March 28, 03:28 AM

Clear Channel says wins ruling on $20 billion buyout

NEW YORK (Reuters) - Clear Channel Communications Inc on Thursday said it won a temporary order from a Texas judge that prevents banks from reneging on their commitments to fund the $20 billion buyout of the radio operator.

The decision does not guarantee the closely watched buyout will go through but does prevent it from falling apart for now, analysts said. Clear Channel shares rose 9 percent, but are still about 34 percent below the price private equity firms Bain Capital Partners LLC and Thomas H Lee Partners LP agreed to pay.

Six banks led by Citigroup Inc were to provide more than $22 billion of financing, and earn more than $400 million in fees, for the buyout.

The private equity firms filed lawsuits in New York and Texas on Wednesday, accusing the banks of backing out of their commitments after capital markets deteriorated. Clear Channel joined in the Texas lawsuit.

The banking group faced losses of about $3 billion to $4 billion on Clear Channel, a person familiar with the situation told Reuters on Wednesday.

The lawsuit filed in Texas claimed the banks interfered with the deal in an overt effort to "run out the clock" and cause the deal to collapse.

Clear Channel said Judge John Gabriel of the Bexar County, Texas, district court issued a temporary order directing the banks not to interfere with the merger by refusing to fund it or demanding new terms. The order expires on April 8.

"This is a decision made having seen only the plaintiffs' papers," said Joel Greenberg, a New York attorney with Kaye Scholer LLP who is not involved in any of the litigation. "It obviously indicates some sympathy with their case, but it's hardly a decision in the merits."

Greenberg said the order will not change anything until April 8, when the judge will hold a preliminary hearing and hear all parties involved.

"It's the first step of many but one that banks would rather not have happened," he said.

"I don't think this necessarily means that the banks are going to be forced to fund the transaction today," said David Bank, analyst with RBC Capital Markets. "But it keeps the deal from falling apart for now."

San Antonio-based Clear Channel did not answer calls seeking comment. An outside spokeswoman did not immediately return a call seeking comment.

Citigroup spokeswoman Danielle Romero-Apsilos, who said she was speaking on behalf of the banking group, declined to comment on the temporary restraining order.

Other banks in the lending group are Credit Suisse Group, Deutsche Bank AG, Morgan Stanley, Royal Bank of Scotland Group Plc and Wachovia Corp.

Clear Channel had agreed last May at the height of the private equity boom to be acquired by the private equity firms for $39.20 per share, the latest increase in the offer price for a deal that was first announced in November 2006.

Clear Channel shares traded Thursday morning at $29.29, up $2.42 or 9 percent, on the New York Stock Exchange.

The original agreement calls for a break-up fee of either $500 million or $600 million -- depending on the reason for a deal failure -- to be paid by the buyers under certain conditions.

(Reporting by Jui Chakravorty and Jonathan Stempel; Editing by Steve Orlofsky)