Clear Channel parties have deal in principle

By Megan Davies and Leslie Gevirtz

NEW YORK (Reuters) - The parties in a dispute over financing Clear Channel Communications' (CCU.N: Quote, Profile, Research) $20 billion (10.3 billion pound) buyout have reached agreement in principle on settling the case and striking a new deal at a lower price of $36 a share, a source familiar with the situation said on Tuesday.

A second source familiar with the matter confirmed the $36 price, and a third source familiar with the situation said an announcement could come later on Tuesday.

Clear Channel struck the deal to be bought for $39.20 a share by private equity firms Thomas H. Lee Partners THL.UL 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 went into litigation this year when THL and Bain filed complaints in New York and Texas against six Wall Street banks -- Citigroup (C.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research), Credit Suisse Group (CSGN.VX: Quote, Profile, Research), Royal Bank of Scotland Group (RBS.L: Quote, Profile, Research), Deutsche Bank (DBKGn.DE: Quote, Profile, Research) and Wachovia (WB.N: Quote, Profile, Research) -- to enforce their agreement to fund the buyout.

Central to the dispute was the hit the banks would take in funding the deal, given the deteriorated lending conditions.

They had agreed to provide $22.1 billion in financing for the deal for fees of $400 million, but according to the original suit filed by Bain and THL, the banks feared they would lose $2.7 billion after the market worsened.

Bain and THL argued the banks tried to renegotiate the financing from long term to a short-term package and to change the terms so it would be unworkable in order to kill the deal.

The banks have argued the two sides were in talks when the buyers sued, which constrained further discussions.