Are BCE's Problems Good News for TD Bank?

Troubles with the deal to privatize BCE Inc. (BCE) may be a positive for Toronto-Dominion Bank (TD), since the bank has been a major participant in the transaction with C$3.3-billion of the C$34.3-billion in committed financing, as well as a C$500-million equity bridge facility. Desjardins Securities analyst Michael Goldberg expects TD shares will react positively to recent developments and reiterated his “top pick” rating and C$84 price target.

Mr. Goldberg told clients:

Recent news about the changes to the Clear Channel (CCU) transaction last week and the court ruling regarding the BCE transaction last night make it increasingly likely that the terms of the BCE deal and its financing will change, or the deal will fall through altogether.

Both a new deal or no deal at all means TD will not experience losses on the syndication of its financing, the analyst noted, adding that TD also stands to benefit by potentially recovering the markdowns that have already been taken.

Mr. Goldberg said:

Since the onset of the credit crunch, banks have faced losses in selling down syndicated financings, like the BCE financing would be.