UK deal structures remain resilient

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The financial press has been awash in recent months with the long running saga associated with the $20bn buyout of US media company Clear Channel Communications, which had for many become a symbol of the increasing fragility of private equity transactions in the prevailing volatile economic climate. The deal, initially signed at the height of the buyout boom in November 2006, hit trouble when the financing banks threatened to pull the plug over fears that they would be forced to make large scale write-downs against the $17bn of leveraged loans they had agreed to provide. Clear Channel is not unique; a host of deals that were signed in the US pre-crunch have run into problems as both banks and financial sponsors have become cautious in the face of falling valuations.

In the UK, litigation issues on buyouts have been largely absent. However, as cases in the US have shown, the more parties involved on one deal the greater the potential for conflict. With club deals on the increase in the UK, courtroom clashes between banks and equity sponsors should the economic climate worsen is a distinct possibility. (Page 12).