BCE rebounds from NY drop, but questions linger

TORONTO (Reuters) - Shares of BCE Inc (BCE.TO: Quote) (BCE.N: Quote) bounced back on Tuesday, as investors found value in the stock after a retreat in New York, spurred by reports that the banks funding the company's buyout were pressing to restructure the C$34.8 billion ($35.1 billion) deal.

The stock of Canada's top telecommunications firm was up 81 cents, or 2.2 percent, at $37.43 on the New York Stock Exchange.

It had slumped 5.6 percent in New York on Monday, in the wake of weekend reports that the banks behind the buyout of BCE had submitted new financing terms to the buyout group, which includes the Ontario Teachers Pension Plan.

The terms contained higher interest rates and other "onerous" conditions, a source told Reuters.

The reports added to uncertainty over whether the deal will be successful, and came as lenders struggle with financing commitments amid tight credit markets.

Troy Crandall, an analyst at MacDougall, MacDougall & MacTier, said he thinks there's a 40-50 percent possibility that the deal will be repriced, perhaps to between C$40 and C$41 a share, from the current C$42.75 per share offer. Even then, he said, BCE shareholders would be best off taking a reduced offer.

"I would see it as being in (BCE's) best interest to take the deal, rather than have the deal fall apart completely or spend months or possibly years in court."

If the deal collapses altogether, BCE shares could plunge to between C$30 and C$32, Crandall estimated. He added that that price takes into account the possibility of a takeover bid from Telus Corp (T.TO: Quote), Canada's No. 2 phone company and a major BCE rival.

Telus was in talks to acquire BCE before the Teachers' group emerged as the winner. Telus walked away citing "inadequacies" in the bidding process.