Canadian Law: No Friend to LBOs

The news out of Quebec today really is quite stunning: a court has held that bondholders in Canada can effectively block a leveraged buy-out if their bonds will be downgraded to junk (as most are, in such situations). Steven Davidoff is incredulous:

If this decision stands, it likely will upend corporate law practice in Canada…

I am not sure the Canadian court fully appreciated the difference between debt and equity in rendering this decision.

All I know is that if this decision stands, expect a lot of interest in Canadian bonds. They’ve suddenly become significantly more attractive.

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