MONTREAL – The $51 billion leveraged buyout of Canadian telephone giant BCE Inc. (NYSE: BCE), by a group of investors led by Ontario Teachers’ Pension Plan and Providence Equity Partners Inc., has hit another snag.

Last month, the Quebec Court of Appeals had ruled in favor of bond-holders who sought to block the deal, saying it would dangerously increase the telephone company’s debt. (READ MORE) But the Supreme Court of Canada overturned that ruling on Friday, allowing the sale to go forward, according to Bloomberg News.

“In light of the delay caused by legal challenges to the plan of arrangement, the company's objective is now to close the transaction in the third quarter of 2008,” BCE said in a statement after the court’s announcement.

Now, however, the banks backing the deal – led by Citigroup Inc. and Deutsche Bank AG – are pushing the buyers to accept worse terms on their $33 billion in planned borrowing, two people close to the talks told Bloomberg News. Citigroup and Deutsche Bank both were among the lenders that attempted to yank their backing for the recent Clear Channel buyout (READ MORE).

Other lenders in the deal include the U.K.-based Royal Bank of Scotland Plc – parent of Citizens Financial – and Toronto-Dominion Bank.

“We continue to negotiate the financing documents in good faith with the sponsors, and stand behind our original commitment to the transaction,” BCE told Bloomberg in an e-mailed statement after the Friday court ruling.

“We expect all parties to the transaction will honor their commitments,” Richard J. Currie, BCE’s chairman, added in a statement on the company Web site.

BCE Inc. (NYSE: BCE) is the largest communications company in Canada, providing residential and business services from telephone to high-speed Internet and digital television to 28 million business and residential customers nationwide. For more information, visit www.bce.ca.