• New York Post, Wednesday, October 7, 2009 10:29 PM

Clear Channel may now default by early next year. The private-equity firms that own the company are asking some big banks to help them keep the company from defaulting on its loans, but the banks now are telling the PE firms to take a hike, say insiders.

The rift is considered fallout from a bruising fight two years ago when the PE outfits forced reluctant banks to live up to their commitment to fund the Clear Channel buyout. The banks that underwrote the debt -- Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, RBS and Wachovia - had wanted the PE firms to walk away from the buyout but the PE firms stuck with the deal, and most of the lenders had to sell their Clear Channel debt at discount prices.

So desperate are the PE firms now that they have offered to steer business from other portfolio companies to the banks that help Clear Channel. But that may not be the best option. The PE firms together own about 16% of Clear Channel's senior loans, and if the company goes bankrupt, they would likely own a piece of the de-leveraged business, which could turn into a profitable investment, says an unnamed lender.

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