BCE Deal Delay Hurts

Shares of BCE Inc (BCE)[TSE:BCE] fell sharply on Wednesday morning after the company said it does not expect its privatization deal to close by December 11.

KPMG told the company that based on current market conditions and the amount of debt involved in the leveraged buyout financing, it will not be able to deliver a solvency opinion – a condition to the closing of the transaction – on time.

The stock was down more than 35% in early trading, or more than C$14, to around C$24.25.

BCE shares jumped nearly 10% on Monday after the U.S. government agreed to help bail out Citigroup Inc (C). It is the biggest lender behind the C$52 billion deal, responsible for US$13 billion of the US$35 billion in loans. Toronto-Dominion Bank, Royal Bank of Scotland (RBS) and Deutsche Bank (DB) are the others.

“We are disappointed with KPMG’s preliminary view of post-transaction solvency, which is based on numerous assumptions and methodologies that we are currently reviewing,” Siim Vanaselja, BCE’s Chief Financial Officer said in a statement. “The company disagrees that the addition of the LBO debt would result in BCE not meeting the technical solvency definition.”

Comments

[Brad Ferris:]

I'm not sure why the KPMG news is any surprise to investors who took the time to read up on the leveraged-buyout details over a year ago. I don't have any invested interest in BCE, but you have to wonder after watching this stock drop so dramatically if the deal has any chance of going through now.

2008 Nov 26 01:03 PM

[John Seaton:]

I have commented on this deal on this site three times before from the point of pensioners depending on the solvency ot their Teachers Pension Plan. I have commented that BCE is a dog and now it must becoming apparent to even the nieve trusting teachers. The pretigious auditing firm KPMG questions whether Bell will be viable and whether it can service all this debt and make up their own pension deficit..
The president of Teachers Pension Plan, Jim Leech, does not seem to be able to influence Bell's policy to correct Bell's abuse of customers
BCE (Bell) has a huge deficit in its own pension fund. Will the Teachers Pension Plan end up having to pay out of their funds to top up Bell's pension deficit down the road if the deal goes through and BCE (Bell) merges into the teachers plan.
Google "Bell sucks," "Bell problems" and "Bell Kevin Crull" to sample what Canadians say about Bell. It will take years if ever to turn this perception around.
Ontario Teachers need to clear out the current pension fund management and replace them with more conservative managers for desperate times. No more gambling on highly leaveraged deals with the teachers pension money. Teachers rise up and protect yourselves. Call your Federation

2008 Nov 26 09:56 PM