The new deal is expected to go to shareholder vote in August or September and close in the third quarter, Mays said.

Clear Channel struck the $39.20 a share deal after much wrangling since announcing it had hired Goldman Sachs to explore strategic options in October 2006.

Bain and THL beat out a rival consortium made up of Providence Equity Partners, Blackstone Group and Kohlberg Kravis Roberts and Co to buy Clear Channel for $37.60 a share.

But the winning bid ran into trouble when a small number of big shareholders said it undervalued the company. The buyout firms then offered $39, and later bumped that to the final price of $39.20.

Since that deal was struck, however, the market has changed drastically, with the cost of financing leveraged loans skyrocketing amid a global credit squeeze and the banks facing losses on the loans.

In March, THL and Bain filed complaints in New York and Texas against the six Wall Street banks -- Citigroup , Morgan Stanley , Credit Suisse Group , Royal Bank of Scotland Group , Deutsche Bank and Wachovia -- to enforce their agreement to fund the buyout.

Central to the dispute was the hit the banks would take in funding the deal, given the deteriorated lending conditions.

They had agreed to provide $22.1 billion in financing for the deal for fees of $400 million, but according to the original suit filed by Bain and THL, the banks feared they would lose $2.7 billion after the market worsened.

Bain and THL argued in litigation that the banks tried to renegotiate the financing from a long-term to a short-term package and to change the terms so it would be unworkable in order to kill the deal.

The banks countered that the two sides were in talks when the buyers sued, which constrained further discussions.

As the parties worked on reaching an agreement on Tuesday, the trial began in New York State Court, after being adjourned from Monday morning.

Mays said that Clear Channel had been reaching out to try and settle the deal since litigation started in March, but that talks heated up in the past 4-5 days.

Chad Leat, Chairman of the Alternative Asset Group at Citi, and a representative of the bank group, said in a statement that the banks were "very pleased to have reached a constructive resolution of the matter."

Scott Sperling, Co-President of THL, said in a statement: "We appreciate that the banks have provided the company with the robust, long-term financing that will allow Clear Channel to achieve its outstanding operational and growth potential."

On Tuesday, Clear Channel shares closed up 4.4 percent at $34.30.

SHAREHOLDER VOTE

Mays said he didn’t have concerns about the vote, even though it faces a tough hurdle under Texas law, where it needs two thirds support to win -- and "no" votes count as against the deal.

"We don’t have concerns regarding the shareholder vote," he said, adding that the deal already had support from major shareholders such as Highfields, which agreed to keep up to $400 million equity in the company, according to the statement.

"Considering our stock was at $29 two days ago, it’s a fair deal from all aspects," Mays added.

The deal, unanimously approved by Clear Channel’s board, is backstopped by funds being put into escrow until it closes, giving it a high level of certainty of completing, Mays added.

The deal also gives investors the option of co-investing in the company, known as "stub equity" by buying up to 30 percent of the outstanding share capital after the restructuring.

Mays said the deal was still a highly leveraged transaction. But he said private equity buyers looked at the long term.

"Radio is a great business, it has a huge audience, a passionate audience."

(Additional reporting by Leslie Gevirtz in New York; Editing by Kim Coghill)