DEALTALK-BCE's banks and buyers value money over reputation

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By Jessica Hall

PHILADELPHIA, June 23 (Reuters) - At the end of the day for Wall Street, the only thing that matters is money.

Canadian telecommunications company BCE Inc (BCE.TO) (BCE.N) may have won a legal victory for its $34.1 billion takeover, but the banks funding the deal have asked for significant financial concessions that could still jeopardize the deal, sources familiar with the situation said on Monday.

The banks have sought deeper economic concessions, including the addition of safeguards on the debt agreements or more lucrative terms on lending the money, sources said. The banks also have actively considering walking away from the deal, the sources said.

BCE stock and bond prices on Monday reflected uncertainty about the deal as investors weighed the positive news of the Supreme Court of Canada decision, backing the company against a group of bondholders, against the risk of renegotiated terms.

"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.

On Friday, the four banks financing the debt portion of the deal said they stood behind their original commitment. The banks, which include Citigroup (C.N), Deutsche Bank (DBKGn.DE), Royal Bank of Scotland (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.

Although talks between the banks and BCE's buyers have been ongoing for months, discussion have intensified following Friday's court ruling and the banks have become more aggressive in asking for financial concessions, sources said.

On Monday, BCE received final approval for the deal by the Canadian Radio-television and Telecommunications Commission, which marked the completion of all required regulatory approvals.

ECONOMIC BATTLE

"The legal battle has ended, we are now turning to the economic battle. Both the private equity and lenders are no longer as interested in the deal as they once were," said Columbia University Law School Professor John Coffee.

Although the lenders may risk bad publicity for demanding safer terms on the debt or potentially exploding the deal, investment banks face too much pressure to protect their balance sheets, analysts said.

"I think the past nine months have proven that dollars are more important than reputation," said Joel Greenberg, partner and co-chair of law firm Kaye Scholer LLP's Corporate and Finance Department.

The negotiations to revise the BCE deal reflect the weak credit markets and mirror the recent battle surrounding the buyout of radio operator Clear Channel Communications Inc (CCU.N).