The purchase of BCE, the parent of telecoms holding company Bell Canada, by a group led by one of Canada's largest pension funds has hit a snag: an appeals court sided with BCE bondholders who want to stop the €22.32 billion (US$35.1 billion) takeover.
The Quebec Court of Appeal reversed Quebec Superior Court Justice Joel Silcoff's decision to allow BCE's takeover by the Ontario Teachers Pension Plan in what would be the largest leveraged buyout in Canadian history, an Associated Press report said.
The bondholders had sought to block the proposed leveraged buy-out, saying the deal would load Canada's largest telecom company with debt, making their bonds a much riskier investment.
But the bondholders said Bell Canada's board of directors never met to consider whether Bell's assumption of responsibility to repay the €21.8 billion (US$34.3 billion) in acquisition debt was in the best interests of the company.
Despite the ruling, the pension fund remained committed to the deal.
'We're reviewing the ruling and evaluating our options with respect to the bondholder claims,' spokeswoman Deborah Allan said in an email.
Mark Meland, one of the lead lawyers for the bondholders, said his clients were pleased by the court's decision.
The ruling in favor of the bondholders could add costs and possibly threatens the deal. BCE said it will try to appeal the case to the Supreme Court.