March 25 (Bloomberg) -- Clear Channel Communications Inc. plunged 22 percent in extended trading after the Wall Street Journal reported its $19.5 billion private-equity buyout is about to fall apart.

The buyout group, led by Thomas H. Lee Partners LP and Bain Capital Partners LLC, hasn't been able to reach an agreement on terms with the banks financing the transaction, the newspaper said today, citing people familiar with the matter. The lenders include Citigroup Inc., Morgan Stanley, Deutsche Bank AG, Credit Suisse Group, Royal Bank of Scotland Group and Wachovia Corp.

A collapse would force private-equity firms to pay as much as $600 million in breakup fees. Clear Channel, the largest U.S. radio broadcaster, dropped to $25.51 from a $32.56 close in New York Stock Exchange composite trading. The stock has traded below the $39.20-a-share offer price because of investor concern that credit-market turmoil will destroy the deal.

David Joyce, an analyst with Miller Tabak & Co. in New York, said the banks and private-equity firms may be engaging in ``very late gamesmanship.''

Negotiations are stuck on details regarding the banks' credit agreement, the Wall Street Journal reported, citing the people familiar. While lenders typically agree to finance buyout transactions when they are announced, the final terms are worked out just before the deal closes, the Journal said.

Lisa Dollinger, a spokeswoman for Clear Channel, said in an e-mail that the company isn't commenting. Matt Benson, a spokesman for Thomas H. Lee Partners, and Alex Stanton, a spokesman for Bain, also declined to comment.

Planned Completion

Clear Channel said as recently as March 20 that it expected to complete the deal during the first quarter. The company's controlling Mays family decided to seek a buyer in 2006 after share repurchases and spinoffs failed to lift the stock price.

The buyout was announced in November 2006 and was soon criticized by large shareholders as being too low. Clear Channel approved the purchase after Thomas H. Lee and Bain, both based in Boston, boosted their bid from $37.60 a share and offered investors a 30 percent equity stake in the new company. Shareholders voted in favor of the deal in September 2007.

Danielle Romero Apsilos and John Gallagher, spokespeople for Citigroup and Deutsche Bank, the lead banks on the transaction, also declined to comment.

Federal Approval

The deal cleared its last regulatory hurdle Feb. 13 with approval from the U.S. Justice Department's antitrust division under the condition that Clear Channel sell its radio stations in Cincinnati, Houston, Las Vegas and San Francisco.

The Federal Communications Commission approved the transaction in January with the condition that the private equity firms sell 48 radio stations in markets where limits on the number that can be controlled by a company have been exceeded.

The company is also selling 448 radio stations in small and midsized markets.

Clear Channel's 5.5 percent notes due in September 2014 rose 2.75 cents, or 4.4 percent, to 65 cents on the dollar to yield 13.9 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The cost to protect Clear Channel debt from default dropped with credit-default swaps tied to the company's debt trading at 700 basis points, according to data from Credit Derivatives Research LLC. Yesterday the contracts were quoted at the equivalent of 1,079 basis points, prices from CMA Datavision show.

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net

Last Updated: March 25, 2008 18:11 EDT