March 26 (Bloomberg) -- Clear Channel Communications Inc. may fall in New York Stock Exchange trading on investor concern that the radio broadcaster's $19.5 billion private-equity buyout is in danger of falling apart.

The stock plunged 22 percent in extended trading yesterday after the Wall Street Journal, citing people familiar with the matter, said buyout firms Thomas H. Lee Partners LP and Bain Capital Partners LLC haven't been able to agree on terms with banks financing the transaction.

Banks are reeling after $195 billion in credit losses and writedowns from mortgage debt. They're also stuck with $200 billion in loans and bonds from LBOs on their books after failing to find buyers. Funding the $39.20-a-share Clear Channel deal would cost banks as much as $3 billion based on the decline in similar LBO loans to less than 85 cents on the dollar.

``Private equity refused to bend on price from $39.20 and the lending syndicate isn't convinced Clear Channel will generate enough cash flow to cover the debt,'' David Miller, an analyst with SMH Capital in Los Angeles, said in an interview. ``Radio values have compressed. This deal looks a lot more expensive now.''

Lenders including Citigroup Inc., Morgan Stanley, Deutsche Bank AG, Credit Suisse Group, Royal Bank of Scotland Group and Wachovia Corp. agreed last April to put up $22.1 billion in financing.

The banks asked for more cash upfront and stricter payment terms, and were rebuffed by the buyers, the New York Times reported late yesterday, citing people briefed on the discussions. If talks fail, Clear Channel and the buyout group may go to court to force a closing, the newspaper said.

Share Drop

Clear Channel has traded below the offer price because of investor concern that credit-market turmoil will destroy the deal. The stock fell to as low as $25.30 in late trading yesterday after declining $1.89 to $32.56 during regular trading. The lower price represents a 35 percent discount to the offer.

``Given the latest actions of some of these banks, reputational risk has apparently dropped down on the list of business considerations,'' said Roy Behren, a portfolio manager with Westchester Capital Management in Valhalla, New York. His fund invests in takeovers and held 2.5 million Clear Channel shares as of Dec. 31. He said banks ``open themselves up to a very large lawsuit as a group if they don't fund this.''

Negotiations are stuck on details of the 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.

`Breakup Fees'

``It's cheaper for the banks to pay breakup fees and get the loan off their books than try and syndicate these loans at 95 to 85 cents on the dollar,'' said Mark Patterson, chairman and co-founder of MatlinPatterson Global Advisers LLC, which invests in bankrupt and distressed companies.

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, as did the spokespeople for the lead banks on the transaction, Danielle Romero Apsilos at Citigroup and John Gallagher at Deutsche Bank.

The collapse of the Clear Channel deal would be a boon for the high-yield bond and loan markets, which have slumped in anticipation of leveraged buyout debt being sold, said Chris Taggert, an analyst at bond research firm CreditSights Inc. in New York.

Deal Pipeline

``It reduces the overhang in the deal pipeline and suggests more committed financing maybe could move away,'' Taggert said. ``There would be a huge chunk of the pipeline that disappears and suggests more deals could be canceled.''

Clear Channel still expects to complete the deal during the first quarter, according to a statement late yesterday giving prices for tender offers on some of its debt. The company's controlling Mays family decided to seek a buyer after share repurchases and spinoffs failed to lift the stock price.

The buyout, announced in November 2006, was criticized by large investors 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.

A collapse may force the private-equity firms to pay as much as $600 million in breakup fees.

Sale of Stations

The transaction 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 gave its approval 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 also is 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 yesterday to yield 13.9 percent, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority.

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

Last Updated: March 26, 2008 00:01 EDT