Headline writers "misspeak"

(With acknowledgement to Senator Clinton – Queen of the “misspeakers”)

In your morning paper, you might have seen a 24 point headline on the upper right hand corner of page one of the Report on Business Section: “Private equity walks – Clear Channel deal near collapse”. Nothing in the actual news story suggested that the buyout funds were at fault, mind you, but that doesn’t mean that it wasn’t a neato headline. That’s what happens when the story is written by journalists from the WSJ in New York, and the headline is written by someone on the night copy desk in Toronto.

A few hours ago, the private equity firms backing the Clear Channel go-private sued their banks for breach of contract. Guess T.H. Lee and Bain Capital really weren’t the ones walking.

More exciting is the impact this kerfuffle will have on the proposed BCE going-private. With the Clear Channel lending syndicate sharing two key lenders with the BCE group (Citigroup and Deutsche Bank), some assume that as-goes-Clear-Channel-so-goes-BCE. That’s why BCE shares are down $1.25 since the word got out that the Clear Channel deal might not close.

For those of us who are long BCE, the flipside is that Citigroup and DB may now have an even harder time pulling out of the BCE deal (see prior post “Are sad days ahead for BCE shareholders?” February 14-08), as Teachers et al will be able to point at the lenders’ alleged behaviour on Clear Channel as “proof” somehow that they are scofflaw banks and worthy of punative damages in any eventual BCE lawsuit. This from Canaccord earlier today:

“BCE (BCE : TSX : $36.69), Net Change: -0.51, % Change: -1.37%, Volume: 4,471,072

Well, it IS Passover week. After trading yesterday, the Clear Channel (CCU) deal was reported to be dead, sending BCE shares down after hours (though one can never be certain regular trading action will follow in the same direction). At the end of the day, only the seller wanted the deal to get done. The buyers and financiers all wanted the deal to fall apart. Citigroup (C)
and Deutsche Bank (DB) were two of the financing partners, as they are in the case of the BCE deal. Though Citigroup, Morgan Stanley (MS), Deutsche Bank, Credit Suisse (CS), Royal Bank of Scotland (RBS) and Wachovia (WB) all previously agreed to finance the deal, details of the credit agreement are typically left to the very end. This, apparently, is the source of the disagreement. The $19 billion privatization is less than half the value of the BCE transaction. On the optimistic side, not doing this deal may free up more money for Citigroup and Deutsche Bank to contribute to the BCE deal.”

MRM
(disclosure – I own BCE)