Late last night the Quebec Court of Appeal put the kibosh on biggest buyout of all time, ruing that the sale of Bell Canada to a consortium of buyers led by the Ontario Teachers' Pension Plan is unfair to bondholders. The deal was already under pressure from lenders who were balking at providing financing, demanding tough debt covenants and high interest rates.
Andrew Willis of the Globe and Mail's Streetwise Blog points out that the Chinese walls at the investment banks working on the deal has produced a very strange result: the banks advising on the deal are the same ones who brought the lawsuit that now has placed it in peril.
Find out what happened after the jump.
What happened is that CIBC World Markets is advising Bell Canada. TD Securities is advising for the Ontario Teachers Pension Plan, and is also one of the lenders who have committed funding but are reportedly attempting to renegotiate. The lawsuit on behalf of the bond holders who want to stop the deal was brought by, among others, CIBC Global Asset Management and TD Asset management, the fund management units of those very same banks.
Deal Journal, which has been playing down the possibility that the deal could get scotched, is now admitting that maybe it's time to panic. Lots of shares of Bell Canada are held by arbs, who will take a shellacking if the deal blows up.
Banks on both sides of BCE meltdown [Globe and Mail]