A dispute erupted last night over the financing for a buyout of Clear Channel, the radio and billboard giant, raising doubts about $130 billion (£65 billion) of similar private equity deals in the pipeline.

Senior bankers in New York involved in funding the $20 billion deal yesterday accused Bain Capital and Thomas H Lee, the private equity firms, of dragging them through the American legal system to force them to shoulder the cost of a $600 million break fee owed to Clear Channel if the deal falls through.

The six banks, which had agreed to fund $16 billion worth of debt for the private equity firms, believe that neither group has any intention of acquiring Clear Channel, an accusation fiercely denied by sources close to the private equity teams.

The sources said: “We’d always viewed these guys as our partners but now their behaviour is just so egregious we can’t quite believe it. It’s clear that once the markets started to drop they had been planning to try and get us to change the terms. Their behaviour is just unbelievable.”

On Wednesday evening the two private equity firms sued the banking consortium after weeks of negotiations over the final terms of the deal financing.

Last May Bain and Thomas H Lee agreed a deal to take Clear Channel private for $39.20 a share, where six banks – Citigroup, Morgan Stanley, Deutsche, Credit Suisse, Royal Bank of Scotland and Wachovia – agreed to fund $16 billion worth of new debt.

Since then, conditions in the credit markets have deteriorated along with Clear Channel’s business prospects.

According to the private equity source, the banks said in December that they faced losses on the deal.

By January, the banks said that their losses had ballooned to $2.7 billion.

They begged Bain and Thomas Lee to change the terms of the financing but the private equity consortium refused.

But one senior banking source, who declined to be named, said: “We believe the private equity firms have no interest in completing the deal. We think the end game is to make us pick up the break-up fee. ”

The Clear Channel dispute fuelled concerns that a large portion of the $130 billion worth of outstanding buyouts – those which have been agreed but not yet finalised – will fall through.

The biggest pending private equity deal is the $34.1 billion takeover of BCE, the Canadian telecoms group, by Providence Equity Partners and Madison Dearborn, which was agreed in June last year, according to Dealogic.

Blackstone’s $8.5 billion takeover of Alliance Data Systems, the technology group, and Montagu’s $3.1 billion acquisition of Biffa, the UK waste management company, similarly have been agreed but not completed.

It is not known whether any of these deals are in trouble.

Late on Wednesday, a US judge issued a temporary order directing the six banks not to interfere with the buyout by refusing to fund it or demanding new terms.

The banks, private equity groups and Clear Channel last night sought to take their case to a higher court.

Shares in Clear Channel rose by 11 per cent to $29.92 in late trading in New York, below the $39.20 offer.

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