A bought deal gone bad has left a group of Bay Street banks facing a combined loss of about $6.5-million, and scrambling to get out.
The investment banking arm of Royal Bank of Canada led a group of banks that bought five million shares of Trilogy Energy Corp. at $37.90 apiece, planning to resell them to investors.
Alas, about one million shares didn't sell, sources say, and now the stock is trading about $6.50 below the deal price, putting the total loss at about $6.5-million.
The group of underwriters has now split up -- or "broken syndicate" in the argot of dealmakers. That means they are no longer working together to try to resell the stock in a co-ordinated fashion, and instead it's every bank for itself.
That doesn't bode well for the stock price, as underwriters who are willing to take a loss and move on will now look to unload the stock, rather than keep it in inventory and risk further hits.
The full list of undwriters, according to the prospectus for the share sale, is RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., Peters & Co. Limited, Stifel Nicolaus Canada Inc., Scotia Capital Inc., CIBC World Markets Inc., FirstEnergy Capital Corp., GMP Securities L.P. and TD Securities Inc.