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Judge Issues Restraining Order against Banks in CC Deal

Clear Channel has been granted a temporary restraining order yesterday against the banks involved in funding its $19.4 billion buyout with two private equity firms.

The order is a positive sign for the company, following speculation that the deal, in chaos because the two private equity firms and the banks were reportedly having trouble resolving differences over final financing terms, would fall through.

Two suits were filed by private equity firms Thomas H. Lee Partners and Bain Capital Partners. One alleges breach of contract and fraud, while the other, joined by Clear Channel, alleges the banks improperly interfered with the merger agreement. The second suit asks for $26 billion in damages, according to CNN Money.

Citigroup, speaking for the banks involved, said they have been and remain prepared to honor the obligations set forth.

It is unusual for a court to issue such a restraining order without first holding a hearing; the banks could ask the judge to set the order aside until a hearing is held, says Lawrence A. Hamermesh, a lawyer of corporate law at Widener University School of Law in Delaware.

The dispute is the latest instance of a private equity deal heading to court as the credit market crunch disrupts the buyout world.