BCE shares dive as court backs bondholders

By Wojtek Dabrowski

TORONTO (Reuters) - Shares of BCE Inc (BCE.TO) (BCE.N) fell more than 10 percent on Thursday on fears that a Quebec court ruling could kill its C$34.8 billion ($35.2 billion) buyout by a group of investors led by the Ontario Teachers' Pension Plan.

In a ruling released late Wednesday, the Quebec Court of Appeal backed debtholders who had complained the transaction -- the world's largest leveraged buyout -- was unfair.

The court said BCE, Canada's biggest telecom company, failed to prove that a buyout could have been structured to provide a satisfactory price for the company's shares while avoiding an adverse effect on the debenture holders.

BCE shares plunged C$4.48 to C$32.64 on the Toronto Stock Exchange and were down $4.77 at $33.06 in New York.

As more than 26 million shares changed hands in Toronto, the exchange announced it had halted trading in the stock because of "data integrity concerns."

News of the court ruling came days after reports that the banks financing BCE's buyout were trying to renegotiate terms, also raising uncertainty over whether the deal would close.

"In our view, the power in the negotiation between BCE/purchasers and the banks has just shifted significantly in favor of the banks," National Bank Financial analyst Greg MacDonald wrote. "In addition, the bondholders will not be satisfied unless they are paid in full."

BCE said it and its would-be buyers would seek to appeal to the Supreme Court of Canada. The court has nothing on its agenda for the weeks of June 9 and June 16, so it could tackle the issue before a June 30 deadline to close the takeover.