Who remembers the heady days of private equity in 2007? Does BCE ring a bell? The Canadian telecoms firm was one of a series of high-profile LBO deals which surfaced in the months before the credit crunch struck.
The putative C$37bn buyout of BCE was led by the Ontario Teachers Pension Plan in a consortium with private equity firms Providence Equity and Madison Dearborn. Alas it is not, apparently, to be.
From BCE, emphasis ours:
MONTREAL, Quebec, Nov. 26 BCE (TSX, NYSE: BCE) today announced the company has received a preliminary view from KPMG that, based on current market conditions, its analysis to date and the amount of indebtedness involved in the LBO financing, it does not expect to be in a position to deliver on the scheduled effective date of BCE’s privatization, December 11, 2008, an opinion that BCE would meet the solvency tests as defined in the definitive agreement, as amended. The receipt at the effective time of a positive solvency opinion is a condition to the closing of the transaction.
At the same time, KPMG indicated that BCE would meet all solvency tests under its current capital structure.
“BCE today enjoys solid investment grade credit ratings, has $2.8 billion of cash on hand, a low level of mid-term debt maturities, and continues to deliver solid operating results,” said George Cope, President and CEO of BCE and Bell.
“We are disappointed with KPMG’s preliminary view of post-transaction solvency, which is based on numerous assumptions and methodologies that we are currently reviewing. The company disagrees that the addition of the LBO debt would result in BCE not meeting the technical solvency definition,” said Siim Vanaselja, BCE’s Chief Financial Officer.
The company continues to work with KPMG and the Purchaser to seek to satisfy all closing conditions. Should KPMG be unable to deliver a favourable opinion on December 11, 2008, however, the transaction is unlikely to proceed.
We make two quick observations. Firstly, it’s unsual to see the auditor stepping in so boldly to quash a deal.
And secondly, we’re given to wondering which other LBOs of yesteryear would never have made it were markets then like they are now. Or to turn that around, which LBOs, using KPMG’s “numerous assumptions and methodologies” would – hypothetically of course – be “technically insolvent”?
Related link:
BCE buy-out in jeopardy after auditor warns – FT
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