Canadian high court suggests June BCE appeal date

A sign is seen outside the offices of BCE Inc., Canada's largest telecoms group, in Montreal, May 21, 2008.

OTTAWA/MONTREAL (Reuters) - In a victory for BCE Inc. (BCE.TO)(BCE.N), the Supreme Court of Canada suggested on Monday it may hear an appeal in three weeks of a lower court decision that threatens the C$34.8 billion ($35.2 billion) buyout of the telecommunications giant.

In agreeing to BCE's request to expedite the process of deciding on whether to hear the appeal, the high court ruled against debtholders who had said there was no rush.

The bondholders won an unexpected decision by the Quebec Court of Appeal last week that held the buyout was unfair to them. They dismissed BCE's subsequent application for the Supreme Court to hold a speedy hearing by the June 30 deadline for the deal as "entirely artificial."

The Supreme Court said that if it does decide to hear the appeal, it could be heard on the morning of June 17.

The debtholders had suggested November 30 as time enough if the Supreme Court agreed to hear BCE's appeal.

In their court filing on Monday morning, the bondholders said BCE and the buyout group had manufactured an artificial deadline, "threatening catastrophe and cataclysm."

"June 30 was simply chosen by BCE and the purchaser as the date by which they would have liked to complete the plan of arrangement," the bondholders said in a court document.

The BCE buyout is being led by the Ontario Teachers' Pension Plan, with the aim of taking the telecoms company private. The partners in the bid are U.S.-based private equity firms Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.

The bondholders are upset because they say the leveraged buyout -- the world's largest -- would saddle BCE's Bell Canada unit, the country's largest phone company, with acquisition debt, devaluing the value of existing Bell Canada bonds.

The dispute between BCE and its bondholders involves C$5.17 billion of Bell Canada debt.

Although the equity portion of the transaction amounts to about C$35 billion, the all-cash transaction, including C$16.9 billion of debt, reaches C$51.7 billion.

OTHER SNAGS

The court battle is only the latest snag in the takeover group's buyout plans.

There also have been reports that the banks backing the buyout, such as Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE) and Royal Bank of Scotland Plc (RBS.L), were attempting to renegotiate the financing terms.

The Teachers' group has said it is committed to the transaction under its original terms.

BCE shares rose 16 Canadian cents to C$33.76 on the Toronto Stock Exchange on Monday. The stock has tumbled about 15 percent over the past two weeks, erasing about C$4.9 billion of value, much of that coming the day after the Quebec court's decision last Wednesday.

The stock has traded well below the offer price of C$42.75 a share, largely because of investor skepticism that the deal can be completed as planned.

Legal experts have said the Quebec court ruling in favor of the bondholders could have wide-ranging implications if the high court lets it stand. It could mean companies will have to balance interests of common shareholders against those of other investors in any transaction involving change of control.

Aside from taking the fight to the Supreme Court, BCE could also seek a negotiated settlement with the bondholders, but analysts have suggested that would likely require a cut in the per-share buyout price.

($1=$0.99 Canadian)

(Editing by Rob Wilson)