March 7 (Bloomberg) -- BCE Inc., Canadas largest telephone company, moved a step closer to completing its C$52 billion ($52.4 billion) buyout after a Quebec judge dismissed a lawsuit by a group of bondholders opposed to the deal.
The acquisition terms are ``fair and reasonable, Quebec Superior Court Judge Joel Silcoff wrote in his decision. The buyout, the largest in Canadas history, is due to close next quarter.
Bondholders, including Aegon Capital Management Inc. and CIBC Global Asset Management Inc., wanted compensation for a decline in the value of their BCE investments, which total about C$1.7 billion. The group argued that the buyout violates the conditions of the bondholder agreement.
``Were obviously quite happy, BCE Chief Legal Officer Martine Turcotte said in an interview. ``The judgments are very clear and very categorical. Were moving forward.
BCE, based in Montreal, accepted a C$42.75-a-share offer from an investor group led by the Ontario Teachers Pension Plan in June. The bondholders said the transaction adds debt and increases the risk that BCE will default, pushing down the value of their holdings.
BCEs C$150 million of 10 percent bonds due in 2054 have tumbled about 36 cents to 131 cents on the dollar since the end of March 2007, when reports of a buyout emerged. The yield has risen to 7.6 percent from 5.8 percent, Bloomberg data show.
The bondholders may appeal the judgment, said Mark Meland, a lawyer from Fishman Flanz Meland Paquin in Montreal, who represents the group. He expects to make a decision about their next step by the end of next week.
``We remain convinced that the case has merit, he said. ``Were considering all of our options.
Teachers intends to raise about C$32 billion in debt to fund the deal, according to filings. Moodys Investors Service said in October it may cut its credit rating on BCE to below investment grade because the proposed purchase would more than quadruple BCEs debt.
U.S. investors Providence Equity Partners Inc. and Madison Dearborn Partners LLC are also part of the buyout group.
In a leveraged buyout, the acquirer borrows most of the purchase price in the targets name, typically resulting in high- yield, high-risk credit ratings. Such ratings are commonly known as junk because they are below investment grade.
Bondholders own about C$1.7 billion of Bell Canadas 1976, 1996 and 1997 debentures, according to court documents. Bell Canada, BCEs phone unit, has about C$6.4 billion outstanding under those debentures.
Trading at Discount
BCE shares have traded as much as 20 percent less than the offer price on speculation that the banks helping to fund the purchase may back out. The buyout group has commitments from banks including Toronto-Dominion Bank, Canadas second-largest lender by assets, and Citigroup Inc.
BCE fell 27 cents to C$35.80 at 4 p.m. in Toronto Stock Exchange trading. The shares have dropped 9.7 percent this year.
The company said its primary responsibility was to shareholders, according to court documents. The bondholders ``willingly and knowingly incurred the risk of a leveraged buyout by purchasing bonds that dont contain ``covenants to guard against such events.
James Morton
1100 - 5255 Yonge Street
Toronto, Ontario
M2N 6P4
No comments:
Post a Comment