The $19bn Clear Channel buy-out collapsed on Wednesday as the media group and private equity firms Bain Capital and Thomas H Lee filed suits accusing their banks of reneging on financing commitments.

The suits, which call for the banks to provide $22bn in funding, marked the unravelling of the close and profitable relationship that prevailed between banks and private equity firms when easy credit fuelled a buy-out boom.

The banks alerted Bain and Thomas H Lee in January that they were facing about $2.6bn in losses on the debt because of the market downturn, according to a person familiar with the matter.

“It seems clear that lenders’ remorse set in when credit markets worsened. Now they are trying to walk away from their commitment,” the firms said in a joint statement.

The banks, led by Citigroup, denied the allegations and said they had complied with terms set out in a commitment letter. “We believe that the suit is without merit and will contest it vigorously,” they said. The syndicate also includes Morgan Stanley, Credit Suisse, Deutsche Bank, Royal Bank of Scotland and Wachovia.

The breakdown has thrown into question the future of Clear Channel, the largest US radio broadcaster, which agreed to go private in late 2006.

Mark Mays, Clear Channel’s chief executive, called the banks “irresponsible” and said their financial risk from the suits dwarfed any potential losses from the buy-out. “The defendants have made clear that they are determined, by any means possible, to destroy the merger and thus avoid their obligation to fund, as they are required legally to do,” Mr Mays said.

In their suit, Bain and Thomas H Lee accused the banks of breach of contract and fraud and asked a New York court to force them to live up to “binding” commitments. In an unusual move, they also joined a suit Clear Channel filed against the banks in a Texas court, accusing them of “tortious interference”.

That claim recalled a landmark 1980s case in which a Texas court ordered Texaco to pay $10bn to Pennzoil for meddling with its planned acquisition of Getty Oil. The damages were later reduced, although legal experts suggested that the banks in this case risked costs far in excess of the $600m break-up fee called for in the Clear Channel deal – particularly in a Texas court.

“Whether it works out in the end, the spectre of Texaco-Pennzoil is something that may make the banks think twice,” said Steven Davidoff, law professor at Wayne State Law School.

The dispute centres on revolving credit lines supplied by the banks. The private equity firms planned to use the lines to make short-term payments on $3.8bn in existing Clear Channel debt. They claim the banks tried to sabotage the deal by unfairly amending financing terms in February to prevent that.