Bondholders have no case, BCE asserts
Written on January 24, 2008
MONTREAL–Disgruntled bondholders have entered unchartered waters with their lawsuits against the $52 billion sale of telecom giant BCE Inc., a Quebec court was told yesterday.
"The oppression claims of the bondholders are completely without merit. They rest on a foundation of sand," Kent Thomson, a lawyer for BCE, told Quebec Superior Court Justice Joel Silcoff.
The bondholders, who claim the sale of the Bell Canada parent is unfair to them, said they will lose money under terms of Bell’s $52-billion takeover by a consortium led by the Ontario Teachers’ Pension Plan, while shareholders make a premium.
The bondholders say they face "significant losses" since BCE’s debentures have lost hundreds of millions of dollars in market value since talks of the company going private began earlier this year.
In final arguments in court, BCE lawyers said the bondholder suits rely on a series of misrepresentations of law and evidence about the transaction.
Thomson said bondholders are wrong to deny that the BCE board’s primary obligation was to maximize shareholder value.
He argued company officials acted entirely appropriately when they guided the auction to obtain the highest selling price after it became clear BCE would be the target of a leveraged buyout, despite rejecting several overtures.
"The simple reality is the directors and management did their best under the most difficult circumstances."
Considering foreign ownership restrictions, BCE had to ensure that the few large Canadian private equity players did not unite and lowball the price, he said.
Teachers’, which leads the buyout, has warned the deal would be in jeopardy if a Quebec court forces the buyers to give bondholders a big payout easy payday loans. Taking BCE private still needs CRTC approval.
BCE in court said bondholders are sophisticated creditors who know potential risks and shouldn’t have been surprised by news of the sale.
Bondholders should have been guided by written warnings that a change of ownership was possible. Instead, they seem to have relied on public statements, including a speech by BCE chief executive Michael Sabia in which he claimed the firm at that time intended to maintain its investment credit rating.
The bondholders are expected to outline their case Thursday, a day before presenting three days of legal arguments.
The case is expected to wrap up next week.