PrefBlog

The Canadian Press has reported:

The purchase of BCE Inc. (TSX: BCE.TO) by a group led by the Ontario Teachers’ Pension Plan hit a snag Wednesday after the Quebec Court of Appeal overturned a lower court’s decision to allow the largest corporate takeover in Canadian history.

The appeal court sided with the company’s bondholders in reversing Quebec Superior Court Justice Joel Silcoff’s decision to allow the takeover of the company in a deal worth $52 billion.

The bondholders had sought to block the proposed leveraged buyout of Canada’s largest telecom company that they say treats them unfairly because it loads the telecom giant up with debt and makes their bonds a much riskier investment.

“BCE never attempted to justify the fairness and reasonableness of an arrangement that results in a significant adverse economic impact on the debentureholders while at that same time it accords a substantial premium to the shareholders,” the five-judge panel ruled.
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Mark Meland, one of the lead lawyers for the bondholders, said his clients were pleased by the court’s decision that was widely expected to side with the company.

“The chattering classes were virtually unanimous in stating incorrectly that we had no chance in being successful, but our group, the bondholders that I represent, we always believed we had a good case,” Meland said.

Mea culpa, mea culpa, mea maxima culpa, and profound apologies to Mr. Meland!

But congratulations … the plot thickens!

The last report on this deal was regarding sabre rattling by the banks.

BCE has the following preferred shares outstanding: BCE.PR.A, BCE.PR.C, BCE.PR.D, BCE.PR.E, BCE.PR.F, BCE.PR.G, BCE.PR.H, BCE.PR.I, BCE.PR.R, BCE.PR.S, BCE.PR.T, BCE.PR.Y & BCE.PR.Z

I have no idea what’s going to happen … there are financing jitters and now some legal jitters … I have no expertise, special information or analytical advantage in either area. It’s all speculation.

Update: More on Bloomberg:

Today’s decision “rewrites Canadian law relating to the duty of Canadian boards of directors to maximize value for shareholders,” Martine Turcotte, BCE’s chief legal officer, said in the company’s statement.

Update: BCE is seeking leave to appeal to the Supreme Court.

Update: The Globe has published the court judgement. Kudos for them! What I’d really like to see is a decision by the relevant authorities that all paperwork filed in all court cases be made publicly available (via Internet) with no charge … but until that happy day, I’ll settle for the press occasionally publishing scraps.

R Split II Corporation has announced:

that it has called 23,250 Preferred Shares for cash redemption on May 30, 2008 (in accordance with the Company’s Articles) representing approximately 5.351% of the outstanding Preferred Shares as a result of the special annual retraction of 134,500 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on May 29, 2008 will have approximately 5.351% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $30.50 per share.

The last RBT.PR.A partial call was noted by PrefBlog last year.

RBT.PR.A is not tracked by HIMIPref™

B Split 2 Corporation has announced:

that it has called 84,808 Preferred Shares for cash redemption on May 30, 2008 (in accordance with the Company’s Articles) representing approximately 8.920% of the outstanding Preferred Shares as a result of the special annual retraction of 177,808 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on May 29, 2008 will have approximately 8.920% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $9.75 per share.

The last partial redemption of BXN.PR.B was noted by PrefBlog last May.

BXN.PR.B is not tracked by HIMIPref™

SNP Split Corp has announced:

that it has called 220,819 Preferred Shares for cash redemption on June 4, 2008 (in accordance with the Company’s Articles) representing approximately 12.091% of the outstanding Preferred Shares as a result of the special annual retraction of 578,638 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on June 3, 2008 will have approximately 12.091% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be US$10.25 per share.

SNP.PR.V is not tracked by HIMIPref™.

The New York Times has reported:

The $51.8 billion takeover of Bell Canada, the largest leveraged buyout ever proposed, appeared to be in trouble over the weekend as the Wall Street banks that committed to finance the deal sought to renegotiate the lending terms, people on both sides of the transaction said on Sunday.
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The negotiations over the Bell Canada buyout began to fray late Friday, said people on both sides of the deal, who were in closed-door discussions all weekend.

The banks backing the deal, led by Citigroup, Deutsche Bank and the Royal Bank of Scotland, sent revised terms to the consortium of buyers. The new terms included higher interest rates, tighter loan restrictions and stronger protections for the banks, far exceeding the original terms, these people said.

Members of the buyers’ group — the Ontario Teachers Pension Plan; the buyout firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity; and Toronto-Dominion Bank — held several conference calls over the weekend to discuss their options. Among the possibilities is filing a lawsuit against the banks to force them to complete the deal on its original terms, these people said.

“It’s patently obvious that the banks have no intention of closing the deal,” one executive who read the revised terms said.

The story was picked up by the Globe & Mail and discussed on Financial Webring Forum.

In the day’s most predictable story:

The Ontario Teachers’ Pension Plan said Monday it expects its lenders to honour their commitments to finance the $35-billion takeover of BCE Inc. after the company’s share price tumbled almost 6 per cent on reports the lending group is pushing for new financing terms.
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BCE spokesman Bill Fox would not comment on whether BCE has been informed about any talks between the company’s buyers and their lenders.

“We have an agreement,” Mr. Fox said. “And we have been working since the deal was signed on all aspects of getting the transaction closed, on the basis of the terms set out in the agreement.”

Desjardins has predicted a repricing of the deal five to 8.16% lower, as reported on PrefBlog May 14. Syndication of the deal has started; the last major development was the loss in court by bondholders challenging the deal.

I simply have no idea what is going to happen here. The Clear Channel precedent is sometimes cited as evidence that the deal will succeed (albeit at a lower price) but in that case, the buyers could threaten the financers with a Texas jury – notorious for awarding crippling damages against whoever has the deepest pockets in the courtroom. I will opine, however, that the deal no longer makes any sense for either the buyers or the financiers … for all their confident, lawsuit-avoiding words, they must be rather eager to pass the billion-dollar-break-fee hot potato to the banks and have done with it.

I don’t have a clue what the implications for BCE’s preferred shares are. It’s possible that the deal could be proceed with the common repriced and the preferred shareholders taken out at the original price; it’s possible that the preferreds could be marked down proportionately to the common; it’s possible that the deal could proceed as a friendly takeover of the common only, leaving the preferred shares outstanding; it’s possible that the deal could collapse completely.

It’s all speculation, not investing, and I doubt whether any of the participants has any better idea than I do at this time.

BCE has the following preferred shares outstanding: BCE.PR.A, BCE.PR.C, BCE.PR.D, BCE.PR.E, BCE.PR.F, BCE.PR.G, BCE.PR.H, BCE.PR.I, BCE.PR.R, BCE.PR.S, BCE.PR.T, BCE.PR.Y & BCE.PR.Z

Update: There’s some calming commentary from the WSJ Deal Blog:

For weeks, chatter has held that, as goes the Clear Channel buyout, so will go the BCE deal. Insofar as both involve banks and money, that may be true.

But, now that some press outlets are reporting that the BCE deal is “in peril” because the banks are fighting on the lending terms, maybe we are all older and wiser enough to realize that asking for new terms — albeit tough terms — does not constitute the death of a deal. It may be time to look at key issues that will distinguish how BCE is different from Clear Channel.
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It’s quite possible– and even probable — that BCE will play out just like Clear Channel, with a lot of huffing and puffing ending in a deal everyone can live with.