Banks funding BCE takeover want concessions-sources

PHILADELPHIA (Reuters) - Banks funding the planned $34.1 billion takeover of Canadian telecommunications company BCE Inc (BCE.TO)(BCE.N) have asked for more significant economic concessions and have weighed altering or scuttling the deal, sources familiar with the situation said on Monday.

BCE won a legal victory on Friday after the Supreme Court of Canada backed the company in a battle against a group of bondholders, but negotiations continue between the banks, the buyers and BCE on the terms of the funding, the sources said.

The banks have asked for significant financial concessions, including adding safeguards to the debt agreements, or seeking more lucrative terms on lending, sources said. The banks also have actively considered walking away from the deal, the sources said.

"All options are on the table. Everything you would normally consider is being considered -- sticking with the deal, changing the terms, or walking away. It's all still very much up for discussion," said one source who declined to be named.

Shares of BCE hit a high of C$38.12 on Monday, but closed at C$36.58 on the Toronto Stock Exchange as investors weighed the news of the Supreme Court decision against the risk of renegotiated terms. The stock trades below the C$42.75 per share offer by the Ontario Teachers' Pension Plan and its U.S.-based private-equity partners.

BCE's 5 percent notes due in 2017 fell to about 80.5 cents on the dollar, to yield about 8.2 percent, traders said. That represents a spread of almost 450 basis points over comparable Canadian government bonds, an indication of greater risk. The bonds were trading as high as 84 cents on the dollar last week.

Although negotiations between the banks and BCE's buyers have been ongoing for months, the talks intensified following Friday's court ruling, the sources said.

On Friday, the four banks financing the debt portion of the deal said they stood behind their original commitment. The banks, which include Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), Royal Bank of Scotland Group Plc (RBS.L) and Toronto-Dominion Bank (TD.TO), declined to comment on Monday.

That public statement may be the banks' intention and goal, but "does not reflect the negotiations behind the scenes," a second source said.

The group buying BCE includes Teachers' Private Capital, the private investment arm of the Ontario Teachers' Pension Plan, Providence Equity Partners Inc, Madison Dearborn Partners LLC, and Merrill Lynch Global Private Equity.

Under the terms of the deal, the regulatory approvals must be obtained before June 30. BCE, however, said on Friday it aims to close the deal in the third quarter due to the legal delays.

(Reporting by Jessica Hall in Philadelphia, Wojtek Dabrowski in Toronto and Walden Siew in New York, editing by Phil Berlowitz, Andre Grenon, Richard Chang)

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