Clear Channel talks said under way : US Business

By Leslie Gevirtz and Megan Davies

NEW YORK (Reuters) - The banks and buyers in the Clear Channel Communications Inc case are in settlement talks, two sources familiar with the situation said on Monday, as the scheduled start of a New York trial over financing the $20 billion buyout was delayed.

New York State Supreme Court Judge Helen Freedman took the bench just before 10 a.m. and told the packed courtroom that the case would be adjourned until Tuesday morning.

Freedman, who is hearing the case without a jury, gave no reason for the adjournment. She told the lawyers that they could leave their laptops and boxes of files in the courtroom.

Stunned silence followed by the clicking of BlackBerrys swept through the courtroom after the judge's announcement. The hallway outside sounded like a crowd of disappointed patrons turned away from a sold-out concert.

Lawyers for both sides declined to comment on the delay.

Two sources familiar with the matter told Reuters that settlement talks were ongoing, while a third said discussions between the banks and buyers had been on and off since litigation started in March, but nothing had yet been resolved.

The Wall Street Journal said a settlement looked imminent, with the banks agreeing to fund the buyout at $36 a share, down from $39.20 called for in the deal.

Shares of Clear Channel were up $2.75, or 9.2 percent, to $32.75 on the New York Stock Exchange.

TEXAS DELAY

Clear Channel struck the deal to be bought by private equity firms Thomas H. Lee Partners and Bain Capital at the peak of the private equity boom last year. The market has changed drastically since then, with the cost of financing leveraged loans skyrocketing.

The deal descended into litigation this year when THL and Bain filed complaints in New York and Texas against Citigroup Inc , Morgan Stanley , Credit Suisse Group , Royal Bank of Scotland Group Plc , Deutsche Bank AG and Wachovia Corp to enforce their agreement to fund the buyout. San Antonio-based Clear Channel joined them in the Texas suit, but was not a plaintiff in the New York case.

A hearing in Texas on the banks' motion to dismiss the litigation there was also moved from Monday to Tuesday morning, according to a clerk for Judge Lori Massey of Bexar County State District Court in San Antonio.

According to the original court filing, the banks stood to lose $2.7 billion from funding the deal.

Monday's events are the latest twist in the battle for Clear Channel since it announced in October 2006 that it had hired Goldman Sachs Group Inc to help it evaluate strategic alternatives. Bain and THL beat out a rival consortium made up of Providence Equity Partners, Blackstone Group and Kohlberg Kravis Roberts and Co to buy Clear Channel for $37.60 a share.

But the winning bid ran into trouble when a small number of large shareholders said it undervalued the company. The buyout firms then offered $39, and later $39.20.

Barrington Research analyst James Goss said Clear Channel's operations had suffered from the rough advertising environment, but added that the company was in a better position than when it first agreed to the buyout.

"It sold the television group and a number of radio stations," he said. "It has refined its focus."

(Additional reporting by Martha Graybow in New York; Editing by John Wallace, Maureen Bavdek and Lisa Von Ahn)

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