Dan Primack, our soon-to-be coworker at PE Hub, floats a theory about the banks who are being sued by Clear Channel and its private equity buyers.
Of the six banks who initially pledged to provide $22 billion in financing for the Clear Channel deal, Citigroup, Deutsche Bank and RBS are also on the hook for the far larger private equity buyout of Canadian telecom BCE.
“Let’s move on to what may actually be happening with some of the banks: They are using Clear Channel as a test case for BCE, which is on tap to be acquired for a whopping Cdn$52 billion,” Primack writes. “So why not walk away from Clear Channel now and, if the penalties aren’t too severe, walk away from BCE next? Sound far-fetched? Not according to sources on the buyside of Clear Channel, who think that’s exactly what’s happening.”
He notes there would be some uncertainties in applying American precedent to Canadian courts.
“But the banks are all about finding the cheapest out,” Primack concludes. “And Clear Channel may just be the best guinea pig they’re going to find.”
Photo: A guinea pig wears a Santa Claus costume at an animal show in Moscow. REUTERS/Sergei Karpukhin
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Your theory is a little far-fetched. The legal verbiage in the BCE deal is much stronger than in the Clear Channel one. Having no knowledge of US law, I cannot comment on Clear Channel but banks trying this in Canada would get slaughtered in the courts. Worse still, they would never again get to do deals north of the border.
- Posted by peter turner