BCE Decision Doesn't Herald Wave of M&A's

The speedy, 7-0 decision reached June 20 by the Supreme Court of Canada highlights how straightforward the case was against BCE bondholders. The judges will provide their reasons at a future date but I’m guessing they will be similar to those outlined in my May 22 post.

Buying BCE call options has been money in the bank. But I wouldn’t feel comfortable holding onto them any longer. The four financing banks, Citigroup, Deutsche Bank, Royal Bank of Scotland, and TD Bank want to renegotiate the loan and the deal could collapse or at least be changed in some way – notably, by lowering the buy-out price.

A lot has changed since the M&A boom. A financial crisis is unfolding. Indeed, it has recently flared up and the S&P Banking Index is now below the nadir reached in March when Bear Stearns folded. 

The current environment really does have lenders worried. For example, analysts with one of the banks backing the LBO (Royal Bank of Scotland) recently issued a report that predicts a crash in financial markets within the next three months. It will pull the S&P 500 down another 20%, they say.

Concerning the victory for shareholders, BCE chairman Richard Currie said: "With this decision by the Supreme Court … we are now in a good position to complete the transaction.” The wording seems rather weak. Shareholders are only in a “good position” to complete the deal?