The would-be Clear Channel bankers lost yet another legal battle today, as a Texas judge rejected their motion to dismiss the case. The judge also set a June 2 trial date, and made no changes to the temporary injunction granted two weeks ago.
For those living under a rock — a rock without Internet access to peHUB — Clear Channel and its presumptive buyers (Bain Capital and THL Capital) have sued a group of lenders for refusing to honor their financing commitment letter. The banks have responded by saying that the plaintiffs have not been negotiating in good faith, and recently tried arguing that it’s too difficult to renegotiate the deal while in the midst of legal proceedings.
All of this, of course, misses the central point: Clear Channel and its buyers don’t want to renegotiate. And why should they? Leave aside the fact that the entire M&A market rests on the maxim of “a deal’s a deal” (would the lenders be insisting on a revised deal if there was no credit crunch?), but the banks are really only suggesting changes that would benefit themselves. Why would Clear Channel open a door that could lead to a lower per share sale price, or the LBO firms to the addition of unfriendly covenants.
I’m no lawyer (although my mother wishes I was), but this dance has always looked like a prelude to the main event: Banks swallowing hard and funding the deal, or deciding it’s cheaper to go to court and lose. The idea that the banks win at trial seems anathema to the capitalist system they are based on.