Ability To Pass Solvency Test Places BCE Sell-off Under Question

November 26, 2008 11:12 a.m. EST

Toronto, Ontario (AHN) - The planned sell-off of Canadian phone giant BCE Incorporated worth $52 billion may not push through because it may not be likely to pass a solvency test which is a vital component of the agreement between BCE and its buyers.

According to accounting firm KPMG current market conditions stops it from confirming that BCE would meet the solvency tests before Dec. 11, the closing date for the transaction. The solvency opinion is a requirement for the transaction's completion.

In a statement, BCE chief financial officers Siim Vanaselja said, "We are disappointed with KPMG's preliminary view of post-transaction solvency, which is based on numerous assumptions and methodologies that we are currently reviewing."

The preliminary solvency test was conducted by KPMG for potential buyer, the Ontario Teachers' Pension Plan Board.

Following this development BCE shares went down by $15.75 per stock to $23 at the start of trading at the Toronto Stock Exchange, but went up to $24.50 when the bourse closed Tuesday.

BCE chief executive officer George Cope insisted the company has solid investment grade credit ratings, $2.8 billion cash on hand, a low level of mid-term debt maturities and delivers solid operating results.