UPDATE 2-Clear Channel parties have deal in principle

(Adds timing of announcement, details on shareholder vote and stub equity)

NEW YORK, May 13 (Reuters) - The parties in the dispute over financing the $20 billion Clear Channel Communications Inc (CCU.N: Quote, Profile, Research) buyout have reached an 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 price of $36 and said at about 5pm ET that an announcement could come in about an hour. A third source familiar with the situation said an announcement could be later this evening, but did not specify a time.

Clear Channel struck the deal to be bought for $39.20 a share by private equity firms Thomas H. Lee Partners Ventures [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 Inc (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 Plc (RBS.L: Quote, Profile, Research), Deutsche Bank AG (DBKGn.DE: Quote, Profile, Research) and Wachovia Corp (WB.N: Quote, Profile, Research) -- to enforce their agreement to fund the buyout.

A trial, set to begin on Monday in New York State Court, was delayed until Tuesday morning and then adjourned until 2pm (1800 GMT). Trial testimony began this afternoon, with an employee of Bain Capital undergoing questioning.

Central to the dispute was the hit the banks were going to take from funding the deal because of the less favorable 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 Lee argued the banks tried to renegotiate the financing from long-term to a short-term package and tried changing the terms so it would be unworkable in order to kill the deal.