The $52 billion buyout of Bell Canada (BCE), billed as the biggest equity deal ever, could be the biggest busted equity deal ever.

A group of investors led by the Ontario Teachers Pension Plan, and including prominent U.S. buyout firms, are facing challenges from the banks that had agreed to support the buyout, according to media reports Monday. The banks have delivered a revised set of provisions for financing the buyout, and they are reportedly onerous enough to abort the deal or revise it substantially.

The problems were reported in Monday's New York Times. In addition to the teachers' pension plan, the buyers include Providence Equity Partners, Madison Dearborn Partners, and Merrill Lynch Global Private Equity. The banks lined up to support the BCE takeover include Citigroup, Deutsche Bank, and the Royal Bank of Scotland.

"It's patently obvious that the banks have no intention of closing the deal," one source told the Times.

Bell Canada is Canada's largest telecommunications company, slightly larger than Telus, which primarily operates in Western Canada. Canadian law stipulates that majority ownership in the telecom firms remain in the hands of Canadian interests.

Different groups of international investors began circling CBE after the Canadian government decided to deregulate the nation's telecommunications market last year. The U.S. deregulated its telecom industry more than two decades ago, only to see it consolidate in recent years. Canada waited until last year to deregulate its telecom markets.

Also on Monday, BCE said the Canadian Radio-television and Telecommunications Commission has confirmed the major conditions for the acquisition of BCE by the investor group. BCE added that it "expects the transaction to close before the end of the second quarter."

If the banks withhold the previously agreed-upon financing, the takeover could be scuttled or the investor group could challenge the banks in court, sources involved in the negotiations said.