Dividend.com: J. Crew Adrift

BCE Deal to Go Private May Fall Apart

BCE(BCE Quote) just reported a preliminary review has found the proposed $35 billion privatization deal may not meet solvency requirements.

BCE -- the parent of Bell Canada -- is being privatized by an investment group led by the Ontario Teachers Pension Plan Board and several U.S. partners. The deal, which had been set to close on Dec. 11, would also be the biggest takeover in Canadian history.

A review by accounting firm KPMG found that BCE would not meet the solvency tests of the privatization agreement -- with the focus on the amount of debt involved in the transaction and current market conditions.

The banks that agreed to finance the deal would be off the hook for what could have been billions of losses. Citigroup(C Quote) is directly on the hook for at least $11 billion of the $35 billion in loans backing the deal. There seems to be a lot of pressure from lenders to either push deals back or terminate them in this present economic environment. We had removed shares of BCE from our "Recommended" list back on Sept. 17, when the shares were trading at $34.58. This was our concern with deals that were on table now, and is why we removed recommendations for this specific event. The downside risk appears to be around the $16 level. The stock may be an interesting play if shares could stabilize here for a day or so. We'll keep an eye on it.

BCE is not recommended at this time, holding a Dividend.com Rating of 3.4 out of 5 stars.