The acquisition of Clear Channel (NYSE: CCU) by two private equity firms, Thomas H. Lee and Bain Capital Partners, continues to play out in the courts. The key issue, as you’ll recall: the banks have been looking for a way out of their massive funding obligations, while THL and Bain seek to keep them to their word. The latest: the funding banks offered to resolve the issue via “binding arbitration”. A full text of the letter sent by the banks can be found here (.pdf). In it, the banks claim that they are commited to funding the buyout “consistent with the terms of their Commitment Letter”, but that a neutral arbitrator could expeditiously resolve the legal dispute (within six weeks, by their estimate).

Not so fast. From a statement made by the two firms: “This proposal is yet another disingenuous attempt by the banks to avoid living up to their commitments. The banks want to move this case into the back room because they fear that a public trial will clearly expose their misconduct.”

Meanwhile, the two sides continue to duke it out in Texas and New York. According to WSJ, the next NY hearing is set for this Thursday.

• Inside The Deals: Texas Justice May Give Clear Channel Another Shot
• Updated: Judge Awards Temporary Restraining Order Against Banks In Clear Channel Case