NEW YORK/TORONTO (Reuters) – Some of the private equity buyers of BCE Inc (BCE.TO: Quote, Profile, Research, Stock Buzz), Canada’s biggest telecom company, are floating an alternative deal to the C$34.8 billion ($28.3 billion) leveraged buyout that was put in jeopardy a week ago, a source familiar with the situation said.
The plan would involve the buyers — led by the Ontario Teachers’ Pension Plan — investing C$8 billion to C$10 billion for a stake in the company, which would remain a publicly-listed entity, the source said.
Of that, C$7 billion to C$8 billion would be financed in bank debt, which would be investment grade, the source said.
In turn, BCE would issue a special dividend to shareholders of C$8 to C$10 a share, the source said.
Aside from Teachers’, the buyer group includes Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.
The proposed leveraged recapitalization would see the private equity firms take a substantial stake in BCE as preferred securities, the source said. The combined stake would amount to about 20 percent.
The plan would be a dramatic alternative to the leveraged buyout originally conceived. That buyout stands on the brink of collapse after accountants ruled a week ago that the company that would emerge from the deal would fail a solvency test because of its huge debt load.
A positive solvency opinion from KPMG, BCE’s accountants, is a condition for the deal to close on Dec. 11 as planned. Without it, BCE said, the buyout is unlikely to proceed, the company has said.
The alternative structure being floated would not require a solvency opinion, the source said.
A Teachers’ spokeswoman declined to comment. A BCE spokesman was not immediately available.
The idea is being proposed to BCE and the banks financing the deal, the source said. However, it is unclear if all the buyers are on board with the plan, a separate source said.
The banks underwriting the buyout are Citigroup (C.N: Quote, Profile, Research, Stock Buzz), Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz), Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) and Toronto-Dominion Bank (TD.TO: Quote, Profile, Research, Stock Buzz).
By Megan Davies and Wojtek Dabrowski
(Editing by Jeffrey Jones)