Case Name :      BCE Inc.: World’s Largest LBO Deal in Jeopardy

Authors :           Stephen R. Foerster

Source :             Ivey Publishing

Case ID :            909N29

Discipline :        Finance

Case Length :    04 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

In November, 2008, BCI Inc. (BCE) appeared to be on track to meet a December 2008 deadline to complete a $52-billion privatization deal. A consortium had previously submitted a winning leveraged buyout (LBO) bid that was estimated to add an estimated $32 billion in debt to the company. Mere days before the deal’s “termination date,” BCE executives were stunned to hear that KPMG auditors advised the deal was in jeopardy of collapse – based on a clause that normally merited little attention. The auditors noted that, on the basis of preliminary assessment, the company had not passed a required “solvency test” which compared the estimated value of BCE’s assets and liabilities in the event that BCE needed to liquidate. BCE executives had little time to determine if the deal could still be saved and if so, how? Conversely, if the deal could not be completed, what would the organization’s next steps be?