BCE objects to Catalyst being allowed to intervene at CRTC hearings into sale

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Brent Fullard
BCE objects to Catalyst being allowed to intervene at CRTC hearings into sale


Brent Fullard

BCE objects to Catalyst being allowed to intervene at CRTC hearings into sale

Published: Wednesday, January 9, 2008 | 4:54 PM ET
Canadian Press: Ross Marowits, THE CANADIAN PRESS


[ 10 January 2008: Message edited by: Brent Fullard ]

Brent Fullard

pogge commented:
"Copyright violation"

Thanks for that big picture comment. Any comment on the Telecommunication Act aspect of this thread, which Act's explicit policy objective is:

"to promote the ownership of Canadian telecommunications carriers by Canadians"?

Or is your vigilance confined strictly to the Copyright Act?


Hey, we've got the president of CAITI joining babble [img]eek.gif" border="0[/img] You should give your first post an edit and simply give the link to the article Brent, poor forum etiquette to do what you've done here but as a new poster I'ma sure it can be forgiven.

I'd be a little curious as to CAITI's interest in this, my first instinct would be to delay or as BCE put it in that article 'collateral purpose'... But speculation, it is curious as to why CAITI would have their president chasing this.


Fullard sent a letter to the federal regulator, dated Jan. 8, arguing the proposed sale to a consortium led by the Ontario Teachers Pension Plan is not in the interests of Canadians because it fails to achieve the legislated objectives of the Bell Canada Act and Telecommunications Act.

Could we see the letter sent, or atleast the arguements that are being presented in the letter?


BCE's objections are "self-serving and further evidence of their attempts to obfuscate the existence or a superior transaction," he said.

I know the process was definately not transparent and the process itself took alot of critisism. Would you be able to sum up the superior transaction for the members of the board Brent?

[ 10 January 2008: Message edited by: Noise ]

Brent Fullard


Thank you for asking.

Catalsyt's letter to the CRTC as well as BCE' letter to the CRTC are both available at [url=http://www.canadiansolution.ca]www.canadiansolution.ca[/url]

Also at that website is Catalyst's original proposal to BCE dated June 25, 2007. Here are the benefits of the Catalyst proposal as they were itemized in that proposal to BCE (keep in mind their sole intent was to maximize shareholder value, hence the ordering of benefits):

The following are the summary benefits of the Catalyst proposal:

* value maximization alternative for BCE common shareholders through use of Stapled Securities and the enhanced annual income of $2.55 per existing BCE common share, a 74% increase from BCE’s current annual dividend of $1.46

* each Stapled Security will consist of one underlying common share that it is contemplated will pay an annual dividend of $1.46 and one underlying subordinated debt instrument that will pay annual interest of $1.09 for a total income of $2.55

* based on current market conditions and yield expectations in the marketplace for comparable instruments, we are of the opinion that the Stapled Securities will have a trading value in the market of between $42.50 to $52.00 and we are confident in the mid range value of $47.25 being attainable.

* each outstanding BCE share will be exchanged for one Stapled Security and therefore BCE shareholders will be entitled to a tax free rollover for approximately 60-70% of the consideration received. The balance will be treated as a dividend income and taxed at rates not dissimilar to capital gains rates of taxation

* the tax efficient nature of the transaction via a share exchange and the significant rollover of a BCE investor’s cost base, places retail investors on a more equal footing with large pension fund investors

* eliminates "reinvestment" risk for BCE common shareholders

* allows existing BCE common shareholders to participate in ongoing future growth of BCE

* no “frictional costs” or involuntary loss of a latent value to a third party, as full equity value of BCE is retained by existing shareholders

* preserves BCE’s investment grade credit rating and retains financial flexibility for Bell Canada to continue with significant capital reinvestment in its core businesses to remain a leading and growing competitor

* preferred shareholders will be redeemed for cash, thereby addressing the concerns of these security holders who would otherwise rank junior to the new subordinated debt within the Stapled Security

* no regulatory or timing risk when compared with alternative private equity and merger alternatives that will involve extensive parliamentary, regulatory, CRTC and/or competition review with an uncertain outcome and uncertain timing

* zero transaction risk as transaction is fully self funding

* Stapled Securities are not affected by the rules governing the taxation of income trusts or the explicit policy intent of the governing legislation, which is to bring income trusts in line with the taxation of corporations. Stapled Securities are issuances of corporations and not tax flow through entities, which are the sole focus of the income trust tax legislation. Other outstanding Stapled Securities are explicitly unaffected by the new taxation on income trusts. There is no policy justification that can be credibly made to deny the tax deductibility of interest on the corporate debt component of a Stapled Security. Direct precedents already exist and have been explicitly unaffected by the income trust tax policy which has now been passed into law

* maximizes tax collection to Ottawa from the earnings of Bell Canada by preserving the largest proportion of taxable Canadian investors

* preserves existing Canadian ownership and control of Bell Canada and Head Office location in Montreal

* preserves existing competitive landscape in this key sector of the Canadian economy that touches all Canadians and businesses

* beneficial outcome to all stakeholder groups including customers, employees, union, management, debtholders and preferred shareholders

* most beneficial outcome to Canadians and the country


Still a copyright violation which I point out because it puts the board at risk for liability, even if it's a small risk. Does that answer your question? Don't ask the question if you can't handle the answer.

Brent Fullard

Noise recommended:

"you should give your first post an edit and simply give the link to the article Brent, poor forum etiquette to do what you've done here but as a new poster I'ma sure it can be forgiven."

Done.....wasn't aware of the easy edit feature. Thanks


Just checking up on this Brent... Revisited the canadiansolution site and read through that letter (like any regulatory letter... That was a painful but informative read. If I see the word hereby one more time, I might have to shoot myself in the foot).

Any new information on the CRTC and this injunction?

Brent Fullard

Noise: You're right....these letters are painful to read, but there is nothing to be gained by leaving anything out.

The three letters pertaining to the Catalyst intervention request have been posted on the CRTC's website at:

Catalyst intervention: [url=http://support.crtc.gc.ca/applicant/applicant.aspx?pn_ph_no=2007-19&lang...


Heh, painful or not I still read them. Thanks for the update... I'd very much appreciate it if you continued to post anything new on this subject here as it's quite informative for me.

I sent a PM to you saying pretty much the same thing.

Brent Fullard

"Our preoccupation right now is the CRTC hearings," spokeswoman Deborah Allen said, referring to Canada's federal telecoms regulator, which will study the deal next month.

Login http://www.reuters.com/article/bondsNews/idUSN1732276620080117>

UPDATE 1-BCE shares continue slump over buyout worries
Thu Jan 17, 2008 2:24pm EST


[url=http://www.reuters.com/article/bondsNews/idUSN1732276620080117]Clickable version[/url] of Brents Link.

TY Brent, keep em coming. The descision on including Catalyst at the proposals will be made on Jan 25th... Does that sound correct?

And from your link:


A wide variety of rumors has circulated regarding obstacles to the BCE takeover, ranging from angry bondholders blocking the takeout to, more recently, Merrill Lynch pulling out after suffering huge losses on U.S. subprime mortgage bets.

First time I've heard that lil tidbit. off to find out more

[ 18 January 2008: Message edited by: Noise ]

Brent Fullard

Teachers' court pleadings are false

Carrie Tait
Financial Post:


Your article of yesterday states:

"Teachers' filing says all of the [BCE] bids on the table would have prompted credit downgrades."

This is false. The Catalyst Proposal was very much “on the table” and the Catalyst Proposal preserved the investment grade credit of BCE.

Teachers’ knows about the Catalyst Proposal because I spoke with Bob Bertram Chief Investment Officer of Teachers on June 26, 2007 to describe to him how the Catalyst Proposal was beneficial to all stakeholder groups and to share our letter to the Board of BCE which had been posted on our website. (see canadiansolution.ca) since it had been press released the prior day (June 25, 2007).

Teachers’ pleadings before the court are therefore false, as Teachers’ had and has knowledge of the Catalyst Proposal, even though it was (improperly) not disclosed to shareholders by BCE in BCE’s Bid Circular dated August 7, 2007, on which the shareholder vote was based.

The credit ratings below under the Catalyst Proposal were subsequently confirmed on or about June 28 by the head of the then loosely formed bondholders’ group, who are now suing BCE for oppression since their bonds are now junk rated on the assumption that the Teachers deal; proceeds.

These are direct quotes from the Catalyst letter to the Strategic Oversight Committee of the Board, dated June 25, 2007:

“Preserves BCE’s investment grade credit rating and retains financial flexibility for Bell Canada to continue with significant capital reinvestment in its core businesses to remain a leading and growing competitor

In addition, since the debentures contained in the Stapled Securities are subordinated in all respects to the outstanding debt of BCE, it is anticipated that ratings of New BCE’s debt will be preserved at a strong investment grade, as they were under the contemplated income trust conversion, for which the ratings were to have been (at least):

Long term debt:

DBRS: A(low)
Moody’s: Baa1

Short term debt:

DBRS: R-1 (low) with stable outlook (confirmed)

Brent Fullard
Executive Managing Director
Catalyst Asset Management Inc.
647 505-2224


Bond question... Maybe some economicist will read Tat and see this [img]wink.gif" border="0[/img]

In this case, what is the difference between junk and investment rated bonds? All I got is junk is short term high yeild bond while investment bond is longer term? What impact would this have on the bond holders?

Brent Fullard

All corporate binds are rated. The higher the rating, the better the credit rating and the lower the default risk. As such higher rated bonds carry a lower interest rate than lower rated bonds of equal term to maturity.

Before the Teachers' deal arrived on the scene, the bonds of BCE were rates at investment grade credit (anything above BBB). Once the Teachers deal looked likely, the bonds of BCE were lowered in their ratings by the various credit rating agencies. This immediately resulted in a reduction in the trading value of all outstanding BCE bonds, of close to an $800 million loss in their value of about $10 billion.

Thanks for nothing Teachers and BCE.

Brent Fullard

[url=http://www.thestar.com/article/298226]Market fears deal for BCE is off[/url]


Shares sag 4% as jeopardized big U.S. buyout suggests Teachers' pact could fall apart as well


Jittery investors in BCE Inc. were rattled yesterday after yet another big leveraged buyout deal was said to be in jeopardy, adding to fears that the $52 billion takeover of Canada's phone giant will ultimately be scrapped amid deteriorating market conditions.

I'm really curious as to the CRTC hearing on this now, and the Bondholders lawsuit thats still with the Quebec court.

Anything new Brent?


It would appear Catalyst will be attending the CRTC hearing afterall. I'll post a link if I can find it, right now this is more rumour mill.