BCE buyout could be in doubt following insolvency warning

27 Nov 2008

UK newspaper the Financial Times reports that the proposed CAD34.8 billion (USD28.1 billion) leveraged buyout of Canada’s largest telecoms group BCE is in jeopardy following an auditor’s warning that the debt burden resulting from the deal could make the company insolvent. A consortium led by the Ontario Teachers’ Pension Plan and two US private equity firms, Providence Equity and Madison Dearborn, is scheduled to complete a takeover of BCE, the parent of Bell Canada and Bell Aliant, on 11 December, and a banking consortium led by Citigroup, Royal Bank of Scotland, Deutsche Bank and Toronto-Dominion Bank agreed to fund CAD32 billion in debt. However, KPMG, hired as an independent auditor, warned that BCE might not meet solvency criteria set in the buyout agreement ‘based on current market conditions and the amount of indebtedness involved in the financing.’ Following the announcement, the Montreal-based firm’s shares plunged almost 35% to CAD25.06 on the Toronto stock exchange.