Teleglobe bondholders team up, hire lawyer (gam)
Bertrand Marotte
MONTREAL -- U.S. and Canadian holders of Teleglobe Inc. bonds expressed concern yesterday that parent BCE Inc. could end up backing away from its commitment to the financially troubled overseas network provider.
The investors, who collectively own more than $500-million (U.S.) of the total of about $1.2-billion in Teleglobe bonds, also said they have banded together in an ad hoc committee and hired a U.S. lawyer who is an expert in defending the interests of bondholders.
In a brief news release, the bondholders characterized as "troubling" BCE's announcement last week that it will review all its options concerning Teleglobe, including a financial restructuring or even a reassessment of its funding of Teleglobe operations.
The recent downgrading of Teleglobe debt to junk status is also a major concern, they said.
The bondholders, speaking through the Boston-based law firm of Bingham Dana LLP, said they have "long viewed BCE Inc. and BCE Teleglobe as parts of the same integrated organization and have consistently relied on BCE Inc.'s numerous public statements as to its continuing intention to fully support BCE Teleglobe.
"To the extent BCE Inc.'s April 8 announcement implies the consideration of any possible course of action other than continued full support, the . . . [bondholders] will need to review their alternatives carefully in order to ensure that their interests as BCE Teleglobe public noteholders are properly preserved and protected."
BCE spokesman Don Doucette said he could not comment on the formation of the group or the worries it has voiced, other than to say: "This sort of initiative is not unusual in circumstances like this, where a review is under way."
Evan Flaschen, head of the restructuring practice at Bingham Dana, said in an interview he anticipates more bondholders will join the group as word gets out.
Mr. Flaschen already represents a group of AT&T Canada bondholders, whose debt has been trading at a fraction of its original value.
He said it's too early to say what exactly the Teleglobe bondholders will do.
"We believe BCE made commitments to Teleglobe and we're hopeful they'll be able to confirm these commitments," he said.
BCE, which does not guarantee any of its subsidiaries' debt, could theoretically walk away from Teleglobe.
But analysts say such an aggressive move would hurt the reputations of BCE and chief executive officer Jean Monty in financial markets, and is probably not the preferred option, although it would be welcomed by shareholders fretting about Teleglobe's continued drag on BCE's share price.
Rather, analysts see BCE going the restructuring route, which would involve tough negotiations with its bondholders and banks, who have equal footing as main creditor groups of Teleglobe.
Under one scenario, BCE would offer bondholders 20 cents on the dollar, some cash and new BCE bonds carrying 50 cents on the original dollar of face value, Dvai Ghose, senior telecom analyst at CIBC World Markets Inc. in Toronto, said recently.
Teleglobe also has a $1.25-billion credit line due in July to a syndicate of banks.
Mr. Doucette said BCE is on track to update investors on its strategy for Teleglobe next Wednesday.
BCE has kept Teleglobe afloat with more than $2.5-billion (Canadian) in funding since acquiring the 77-per-cent stake in it that it didn't already own, about 17 months ago. |
