The skulduggery of banks who want out of LBOs is already widely known, and expected. Big financial companies have tried to put the legs out from under a deal to take Clear Channel (CCU) private, and now appear ready to take a powder on the contract to buy-out Bell Canada (BCE).

Leaving aside the ethics of the matter, although that is hardly fair, the $51.8 billion which was offered for BCE was expensive. It was, according to the Guinness Book Of World Records and other sources, the largest deal of its kind, ever.

Now, banks, including Citigroup (C), which does not have much of a reputation left at any level, want better terms including higher interest rates. According to The New York Times "The negotiations over the Bell Canada buyout began to fray late Friday."

The whole matter is likely to end up in court with the LBO firms in the deal, which include Providence Equity Partners and Madison Dearborn Partners, filing suits to close the deal. BCE may take legal actions as well.

A BCE lawsuit may be the wild card in the fight. That suit could be brought in Canada, giving the company a home court advantage. There is question of whether Canadian courts would be less forgiving than their counterparts in the US. That means the banks could be in for more trouble than the expected.

When the BCE deal was announced, shares got above $44. If the courts in Canada start to move in the direction of forcing a deal to be closed on terms similar to those in the original contract, the final price may not be far from that number.

Douglas A. McIntyre

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