On Tuesday, the Supreme Court of Canada will hear the appeal by BCE Inc. of the Quebec Court of Appeal ruling in favor of Bell Canada debenture holders. The bet seems to be that the court will overturn the decision, moving the C$52 billion ($53.2 billion) buyout of BCE by Teachers’ Private Capital, Providence Equity Partners Inc., Madison Dearborn Partners LLC and Merrill Lynch Global Private Equity toward a funding. A ruling in favor of the lower court could kill the deal.

The case is of enormous interest to everyone involved in M&A in Canada. The appellate court’s decision caught risk arbitrageurs and lawyers by surprise and offered a potential out to lenders for the largest North American buyout to date. The Quebec Appeal overturned a lower court ruling that said the plan of arrangement, which requires court approval, was not unfair to Bell Canada bondholders. Debtholders have argued that they suffer from the LBO because their debenture fell to junk status and their price has dropped 18 percent.

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