There's been a lot of litigation over private equity deals that have gone bust since the credit crunch began, last summer. But the banks themselves have thus far avoided an adverse ruling that could haunt them in the future. Until now. On Thursday, New York State Supreme Court Justice Helen Freedman will hold a hearing on motions for summary judgment by the private equity firms Thomas H. Lee Partners and Bain Capital against six banks who have been accused of failing to honor their commitments to finance the $19.4 billion buyout of radio-station giant Clear Channel Communications . The banks, meanwhile, are also potentially on the hook to Clear Channel itself on claims that their repudiation of the financing deal amounts to a tortuous interference with contract. This morning, counsel for the banks made public a letter to the private equity firms, suggesting that the fight over the commitment letter be resolved through binding arbitration before a single, neutral arbitrator. "The banks are repeat players in this game," says Elizabeth Nowicki, a professor at Tulane University Law School and a participant in a private equity session at the recent Tulane Corporate Law Institute. "I can see how these banks are beginning to sweat. The stakes are pretty darned high," she said. Nowicki sees the offer to arbitrate as "a sign that nobody, including the banks' counsel, knows how this is going to play out." An adverse ruling could im ...
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