OTTAWA (Reuters) - The Supreme Court of Canada will decide next week whether to hear an appeal of a lower court decision that could derail the C$34.8 billion ($35.2 billion) plan to take telecoms giant BCE Inc. (BCE.TO) private.
Bondholders asked the Supreme Court on Friday to reject the telecom giant’s request to be allowed to appeal the decision.
The debtholders won a surprise Quebec appeals court decision last week that BCE’s privatization was unfair to them as it would lower the value of their debentures.
“There is no doubt that the completion of the plan in its present form will materially prejudice the debentureholders,” a group of bondholders said in their submission to the Supreme Court, meeting a court-imposed deadline of the close of business on Friday.
They said their losses collectively exceed 20 percent.
The bondholders also argued that it was unfair to them to shorten the normal timetable for any hearing, and said that in any case the Quebec decision did not raise any issues of national importance that merited the high court’s attention.
The Supreme Court, conscious of the June 30 deadline for court approval of what would be the world’s largest leveraged buyout, has earmarked June 17 for an oral hearing if it does decide to hear the appeal.
It has also given a clear signal that it would decide in the next several days on whether to hear the appeal, because it has suggested June 6 as a deadline for BCE’s written arguments. If it decides not to hear the appeal, the Quebec court ruling stands.
The Ontario Teachers’ Pension Plan is leading the attempt to privatize BCE, which is Canada’s largest and the parent of Bell Canada.
Partners in the bid are U.S.-based private equity firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.
BCE says the Quebec court decision jeopardizes billions of dollars of value for BCE and hundreds of thousands of shareholders.
In the wake of the Quebec decision the BCE share price has fallen to C$35.05, well below the C$42.75 being offered in the proposed buyout.
But the bondholders in their submission on Friday contested the “alleged losses” of the shareholders: “The current trading price of the BCE shares remains well above the trading price in the period before there was any public speculation about a possible leveraged buyout for BCE.”
BCE also argues that the decision would place an impossible burden on all corporate directors -- not just those of BCE -- by requiring them to weigh the interests not just of shareholders but also creditors even beyond the contractual rights of bondholders.
The creditors argue that the deal would relegate the status of their bonds to not much more than those of junk bonds, and the Quebec court sided with them.
Reporting by Randall Palmer; editing by Rob Wilson