Judge Helen E. Freedman turned down a request from six banks to drop a lawsuit brought against them by Clear Channel for allegedly changing a funding deal to buy out Clear Channel.  Freedman said she would let Thomas H. Lee and Bain Capital, the buyers of Clear Channel,  to pursue their complaint about “specific performance,”..they contend that the banks should be forced to follow through with the exact terms of their deal to finance $19.4 billion to buy out Clear Channel.  The banks, include Morgan Stanley, Credit Suisse, Deutsche Bank, Citigroup, Wachovia and Royal Bank of Scotland. They argued that New York law does not allow the courts to force a lending agreement. The judge ruled against them.  The deal is supposed to be funded on June 12th, but the banks, facing a strong economic downturn reportedly wanted to back out or at least change the terms more in their favor.

Freedman did tell the plantiffs they needed stronger evidence that the banks had actually breached their commitments.  The private equity firms say they banks were trying to back out, while the banks say they were ready to fund the deal but were negotiating when the companies filed the suit. The judge wrote, “The plaintiffs’ evidence that the defendants threatened not to fund the Acquisition unless the plaintiffs agreed to the disputed terms is not compelling.”  The judge did open the door for Thomas Lee and Bain to provide more evidence.