This is hilarious. Bain Capital and THL are suing their lenders in Texas over the terms of the debt that the lenders are offering to fund Bain and THL's leveraged buyout of Clear Channel.
Bain and THL should consider themselves lucky that their lenders even exist, much less that they are still offering to attempt syndication of LBO debt in this frozen, illiquid market.
I'd recommend a quick read of the memo from Ropes & Gray, counsel to Bain and THL, the sponsors of this ill-fated LBO.
We're living in a completely different LBO landscape from 2006 (when this deal was struck) and even as late as May 17, 2007 (when it was re-negotiated), sponsors were getting crazy stuff from banks like equity bridges, cov-lite and paper-thin covenants (e.g., no debt-to-equity maximum ratio, no "no call" protection). Banks were bending over backwards to get lending business from sponsors. But that worm turned around June/July '07 and we're in a completely different world. The banks have a solid argument that the credit crunch is an event similar to legal concepts like force majeure and impossibility of performance. They should walk away clean. Paying the breakup fee would be noblesse oblige.
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