BCE buyout in trouble; banks seek to renegotiate terms

Source: Exec Digital Canada

Date :5/19/2008 6:56:03 AM

The buyout of BCE Inc, Canada’s largest telecommunications company gets complicated as investment banks financing the deal seek to renegotiate lending terms.

Providence Equity Partners, Ontario Teachers' Pension Plan and Madison Dearborn are seeking to take BCE private for nearly $52 billion (C$34.8 billion), which would make it the largest leveraged buyout ever.

Closing the deal

According to the Wall Street Journal talks began to fray late on Friday, and the banks sent the buyers a set of revised terms, including higher interest rates, tighter loan restrictions and stronger protection that far exceeded the original terms. Talks lasted all weekend, according to the report.

The newspaper quoted one executive who read the revised terms as saying, "It's patently obvious that the banks have no intention of closing the deal."

Shares of BCE, operator of Bell Canada, fell $2.21, or 5.7 percent, to $36.60 in morning trading on the New York Stock Exchange.

Squeezed

Earlier this month Providence Equity Partners CEO Jonathan Nelson told Fortune magazine that he expects the banks and other partners to honor their commitments to the deal. However banks are feeling squeezed because of losses from the subprime crisis, and their stomach for financing leveraged buyouts has diminished.

Last week U.S. radio operator Clear Channel lowered its takeover price of its radio assets in order to get the $18 billion transaction financed.

May 19, 2008