In a ‘deal or no deal’ scenario that unfolded in the middle of the night, Entertainment One’s British lenders J.P. Morgan said ‘no cash’ would be offered in its proposed $68-million reverse takeover of DHX Media and, according to insiders, DHX said ‘No deal.’

‘They [DHX] want to do the deal as if nothing has changed since Sept. 29,’ when the deal was announced, said a source close to the deal who spoke on condition of anonymity. ‘But the lender is saying, ‘We can do the deal, but we need to come back to the table and revise this to reflect current market conditions.”

Asked if the companies might continue to talk following Thursday morning’s announcement that the deal had fallen apart, the source said: ‘My sense is this is it; it’s done.’

On Wednesday, DHX shares were worth exactly half ($0.425) of what they were ($0.85) the business day before the deal was announced, prior to Wall Street’s October crash.

J.P. Morgan — as well as minority lenders Bank of America, TD Bank and the U.K.-based Barclay — were reportedly willing to go ahead with the deal on a ‘stock only’ basis, but DHX declined.

The original takeover proposal — which would have paved E1’s way onto the TSX — was two-pronged. One option would have seen DHX investors get a 25% cash and 75% share swap. The other would have offered investors a direct one-for-one share swap at $0.9409 (as originally announced), still well above yesterday’s close of $0.45.

‘The plan here was to reverse onto the TSX,’ said the source. ‘They [the lenders] were willing to do the deal, but they wanted to change the deal to reflect current market conditions. The second thing is they’re willing to do the deal, and the money’s there, but based on the [market] changes, the senior lenders came back and said it doesn’t make sense.’

Asked whether the initial J.P. Morgan credit line of $150 million is still intact, the source said: ‘There’s no issues with the funding; it’s just that the terms no longer made sense. The lenders said go back and renegotiate. If DHX had come back to the table, the deal could have been done.’

E1 was not available for comment; senior executives are apparently at a corporate retreat in Florida. DHX did not return calls.