BCE says C$34.8 billion buyout in jeopardy
By Wojtek Dabrowski and Megan Davies
TORONTO/NEW YORK (Reuters) - BCE Inc's C$34.8 billion ($28.3 billion) leveraged buyout stood on the brink of collapse on Wednesday after accountants ruled that the company that would emerge from the deal would fail a solvency test because of its huge debt load.
Shares of BCE, Canada's biggest telecom company, shed more than a third of their value as investors reacted to the latest twist in the saga of a leveraged buyout deal that ranks as the world's largest.
The buyers, led by the Ontario Teachers' Pension Plan, have offered C$42.75 a share for BCE. A positive solvency opinion from KPMG, BCE's accountants, is a condition for the deal to close on December 11 as planned. Without it, BCE said, the buyout is "unlikely" to proceed.
"I think the highest probability outcome is that the deal is dead," said Barry Allan, founding partner of Marret Asset Management, a boutique firm specializing in high-yield debt. He added, however, there is still a chance the deal could be repriced, perhaps at C$35 a share.
On the road to the December 11 closing date, the deal has already faced regulatory scrutiny as well as a Supreme Court of Canada challenge by angry debt investors.
And on Wednesday, BCE -- the parent of Bell Canada -- said KPMG has found the company would not meet the buyout agreement's solvency test because of current market conditions and the amount of debt involved in the financing.
"This is the best Thanksgiving gift for the banks," said a global head of investment banking at a U.S. bank, who declined to be named because he was not authorized to speak with the media. "They get to walk away -- it's the 'easy out' that they dreamed of but never thought they'd get."
BCE shares plunged C$13.10, or 34 percent, to close at C$25.25 on the Toronto Stock Exchange as investors digested the news. Continued...