In re Clear Channel Outdoor Holdings, Inc. Shareholder Litigation
|Court:||Delaware Chancery Court|
|Case Contacts:||Mark Lebovitch, Jeremy Friedman|
On March 7, 2012, BLB&G filed a shareholder derivative complaint in the Delaware Court of Chancery on behalf of the City of Pinellas Park Firefighters Pension Board in the name and for the benefit of Clear Channel Outdoor Holdings, Inc. ("Outdoor" or the "Company"), against Outdoor's board of directors (the "Board") and Outdoor's controlling shareholder Clear Channel Communications, Inc. ("Clear Channel").
This derivative lawsuit alleged that Clear Channel has abused its 90% ownership position to compel Outdoor to provide what will soon be a one billion loan (the "Loan') via an unsecured line of credit at an interest rate that is less than half of what the market would charge Clear Channel for similar debt. In light of Clear Channel's poor financial condition and $16 billion debt load, Outdoor faces a strong prospect that it will never be paid back on the unsecured Loan.
In response to the filing of the Pinellas Park action, the Outdoor Board formed a special litigation committee ("SLC") of purportedly independent directors to investigate the alleged wrongdoing. In July 2012, the SLC requested, and the Court granted, a six-month stay ("Stay") of the derivative litigation to provide the SLC with sufficient time to conduct its investigation.
Following extensive discussions, BLB&G and the Outdoor SLC were able to negotiate a settlement pursuant to which Outdoor will, among other things, (a) immediately dividend $200 million to its shareholders and (b) provide a delegation of authority to independent directors to demand repayment of a portion of the Loan when the Loan balance exceeds $1 billion.
On March 28, 2013, the parties executed a memorandum of understanding reflecting the settlement terms.