BCE buyout hits another bump as court upholds debt-holders' claim

22 May 2008

A Quebec appeals court has upheld dissident debt-holders' claim that the C$51.7 billion ($52.7 billion) acquisition of Canadian telecom giant BCE Inc was unfair to those holding debentures issued by the company's Bell unit.

The case would now move back to the lower court, which originally rejected the debt-holders' motion.

Montreal-based BCE said it will appeal the matter to the Supreme Court of Canada as quickly as possible.

The Quebec court of appeal suspended the deal as it upheld the view that the deal unfairly affected the holdings in debt securities issued by Bell Canada, BCE's largest subsidiary, the 97 debt-holders said in a statement.

Under the terms of the deal, Bell Canada would have to guarantee $34 billion in debt being taken on by the buyout group to finance the deal and that has suppressed the value of existing debt, they said.

"The judgment overturning the Quebec superior court decision rewrites Canadian law relating to the duty of Canadian boards of directors to maximise value for shareholders in the context of a change of control transaction, as well as to the entitlements of bondholders in those circumstances,'' BCE chief legal officer Martine Turcotte said in a statement.