Photos of the TD Securities trading floor in Toronto on April 3 2013.Fred Lum/The Globe and Mail
It's rare to have a bought deal re-priced right after it's launched. The Canadian market just saw this happen twice in one week.
After Bellatrix Exploration Ltd. revamped the terms of its share sale, Madalena Energy Inc. revised the terms of its own on Wednesday, lowering the price at which the shares are sold to investors.
Last week Madalena launched a $50-million bought deal to fund its acquisition of Argentinean assets from Gran Tierra Energy Inc, in which the underwriters, led by Dundee Securities, agreed to purchase the shares at 55 cents each and resell them to the market.
This morning Madalena announced it would re-price the deal, such that the shares would now be sold at 51 cents each, a 7 per cent lowering of the offering price.
Not only is it unusual to see a bought deal get re-priced, but both Bellatrix and Madalena are energy players, proving that even though the oil and gas market has been hot, investors won't lunge at everything that comes their way.
Still, Madalena's decision to rework the deal isn't as aggressive as Bellatrix's, because Bellatrix not only lowered the offering price but also slashed the deal size to $150-million from $250-million. Madalena is still looking to sell $50-million worth of shares.
Bought deals are rarely re-worked because the underwriters enter into a contract with the issuer to assume any liability for any shares that go unsold. The fees the underwriters earn on a deal are designed to compensate them for this risk.
Tim Kiladze