NEW ORLEANS – The giant banks providing the debt for the $27 billion buyout of radio giant Clear Channel Communications got a one-two punch of bad news yesterday as pressure continued to mount for them to follow through with the deal.
According to people familiar with the matter, big shareholders of Clear Channel, including hedge fund Highfields Capital, are threatening to pull their trading business from Citigroup and Deutsche Bank if they don’t proceed with their financing of the buyout.
The shareholder threat is the latest twist in an increasingly high-stakes battle between deep-pocketed private-equity titans Bain Capital and THL Partners and the six banks on the hook to finance the mega-deal. Some estimate that Highfields paid as much as $12 million in fees to Citi last year for their prime brokerage services.
Meanwhile, Bain Capital and THL Partners, the private-equity firms buying the radio giant, yesterday won a bid for a possible May 5 trial date seeking to force Citi, Deutsche and four other banks to stick with the buyout.
Bain and THL have sued their lenders for allegedly trying to pull out of their financing commitments, which involve providing more than $22 billion in debt. The banks, for their part, claim it’s the private-equity firms that want out of the deal.
Those developments came as a top mergers and acquisition executive said that the light at the end of the tunnel for the M&A business may not come until next year.
“We don’t see access to capital for large deals any time soon,” Mark Shafir, Lehman Brothers chairman and co-head of global M&A, said yesterday at the Tulane Corporate Law Institute Conference in New Orleans. “The financial system needs some time to de-lever.”
He predicted that M&A volume will slip to $2.7 trillion this year from $4.2 trillion in 2007, along with around a 30 percent decline in corporate mergers and an 80 percent decline in private-equity deals.