By Wojtek Dabrowski and Megan Davies

TORONTO/NEW YORK (Reuters) - BCE Inc's C$34.8 billion ($28.3 billion) leveraged buyout stood on the brink of collapse on Wednesday after accountants ruled that the company that would emerge from the deal would fail a solvency test because of its huge debt load.

Shares of BCE, Canada's biggest telecom company, shed more than a third of their value as investors reacted to the latest twist in the saga of a leveraged buyout deal that ranks as the world's largest.

The buyers, led by the Ontario Teachers' Pension Plan, have offered C$42.75 a share for BCE. A positive solvency opinion from KPMG, BCE's accountants, is a condition for the deal to close on December 11 as planned. Without it, BCE said, the buyout is "unlikely" to proceed.

"I think the highest probability outcome is that the deal is dead," said Barry Allan, founding partner of Marret Asset Management, a boutique firm specializing in high-yield debt. He added, however, there is still a chance the deal could be repriced, perhaps at C$35 a share.

On the road to the December 11 closing date, the deal has already faced regulatory scrutiny as well as a Supreme Court of Canada challenge by angry debt investors.

And on Wednesday, BCE -- the parent of Bell Canada -- said KPMG has found the company would not meet the buyout agreement's solvency test because of current market conditions and the amount of debt involved in the financing.

"This is the best Thanksgiving gift for the banks," said a global head of investment banking at a U.S. bank, who declined to be named because he was not authorized to speak with the media. "They get to walk away -- it's the 'easy out' that they dreamed of but never thought they'd get."

BCE shares plunged C$13.10, or 34 percent, to close at C$25.25 on the Toronto Stock Exchange as investors digested the news.

Shareholders and analysts have long speculated that the banks underwriting the buyout -- Citigroup, Deutsche Bank, Royal Bank of Scotland and Toronto-Dominion Bank -- would try to seek a way out of their commitments as financial markets deteriorated.

Those concerns lingered even as Teachers, TD Bank and BCE repeatedly reassured investors that they remained pledged to the buyout and were working toward its close.

The U.S. investment banker, who is not involved with the deal, said the banks funding the takeover would have faced a massive legal battle if they had just walked away. But now, with BCE failing to get a solvency opinion, the banks have an escape and protection.

"The banks get to say 'We were willing and ready to do it. It's just BCE wasn't able to meet their side of the bargain'," the investment banker said.

Shares of Citigroup shot up 12 percent to $6.80 on the New York Stock Exchange.

SOLVENCY CLAUSE

A source familiar with the situation said BCE's board of directors inserted the solvency clause into the deal as a condition of its closing. However, BCE spokesman Mark Langton said both the purchasers and the company agreed the clause should be written into the agreement.

The condition to have a solvency opinion by a third party is rare in large deals, said Joel Greenberg, a partner at law firm Kaye Scholer, who specializes in mergers and acquisitions.

The company said it disagreed with KPMG's preliminary view and that it continued to work with the accounting firm and the purchaser to seek to satisfy all closing conditions.

Aside from Teachers, the buyout group includes Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.

BCE shares have long languished below the buyout offer price of C$42.75 a share as investors fretted that the deal could be repriced, delayed or abandoned altogether because of problems in global financial markets.

Citigroup, Royal Bank of Scotland and Deutsche Bank had no comment. TD Bank said it was continuing to work with the parties to see if the deal will be completed.

KPMG also declined comment, citing "our professional obligation to maintain confidentiality concerning the affairs of our clients".

In mid-June, BCE won the backing of the Supreme Court of Canada, which overturned a Quebec Court of Appeal decision that had said the deal did not take adequate account of the interests of existing bondholders.

Should the BCE buyout fail, the bankers who advised the company and the purchasers could also lose some of their fees. Typically, such fees are paid on completion of a deal.

Advisers to BCE -- Goldman Sachs, BMO Capital Markets, RBC Capital Markets, Greenhill & Co and CIBC World Markets -- were to earn an estimated $68.27 million in target adviser fees according to data from Thomson Reuters and research firm Freeman & Co.

Advisers to the consortium buying BCE -- Citi, Deutsche Bank, RBS, TD Securities and Morgan Stanley -- were to earn $61.18 million in estimated fees.

(Additional reporting by Scott Anderson and Lynne Olver in Toronto and Jessica Hall in Philadelphia; Editing by Lisa Von Ahn, Peter Galloway and Rob Wilson)