Three-month BCE trading on the TSX

BCE Inc. has decided to defer the declaration of a dividend on its common shares for the second quarter of 2008, the company announced Monday.

The move to hang on to the $294 million that would have gone to shareholders is seen as an effort to provide some comfort to bankers financing the $52-billion sale of BCE. They are reportedly concerned about the terms of the deal and want to revise them.

BCE said the money "will be retained by the company as BCE works to complete the proposed privatization transaction" with an investor group led by the Ontario Teachers' Pension Plan.

The takeover of Canada's largest telecommunications company, launched in mid-2007, has dragged on through competing bids, regulatory hurdles and a challenge from bondholders that went all the way to the Supreme Court of Canada.

A report Monday suggested that negotiations over financing could drag out until the end of the year, delaying completion of the transaction until December.

A spokesman for BCE declined to comment on the report, only saying the deal is expected to close "in the third quarter of this year," which would be by the end of September.

Despite the $42.75-a-share offer on the table, BCE has been trading in the $36 to $37 range because of the uncertainty about the deal. It closed down $1.21 at $35.55 in TSX trading Monday.

There has been much speculation that the bankers — Citigroup Inc., Deutsche Bank, Royal Bank of Scotland and the Toronto-Dominion Bank — are concerned about the terms of the deal because of the credit crisis that hit after it was announced last year.

They are lending the buying group the money that will fund most of the transaction.

When the deal was announced, the buyers — the Ontario Teachers' Pension Plan and its U.S. partners, private equity firms Providence Equity Partners Inc., Madison Dearborn Partners and Merrill Lynch Global Private Equity — offered $42.75 a share.

But that price has been seen as too high in the current economic climate. The Globe and Mail said the bankers would be pleased to see the offer drop to $35 to $38 a share.

The bank's last public comment came after BCE won a Supreme Court of Canada decision on June 20, overturning a lower court ruling that said the company had to consider the rights of bondholders in the takeover.

The banks said then that they would "continue to negotiate the financing documents in good faith with the sponsors," the Ontario Teachers' Pension Plan and its partners.

With files from the Canadian Press