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Bought deal pulled three weeks after launch

Enbridge pipeline leak spills oil in Alberta

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PetroFrontier Corp.'s 15-million bought deal is the latest victim in a growing trend of terminations that were once extremely rare.

On Wednesday, PetroFrontier announced that its bought offering of subscription receipts has been pulled after receiving a notice of termination from underwriter Macquarie Capital Markets Canada. "Management of PetroFrontier is of the view that Macquarie did not have a valid legal reason to terminate the underwriting agreement and PetroFrontier is currently reviewing its options in this regard," the firm said in a statement.

Previous examples of deals that have been pulled or re-worked after launching include Extorre Gold Mines, Great Basin Gold and Karnalyte Resources. In some cases, the deals were pulled simply because the market moved the wrong way and the underwriters were stuck with stock they didn't want -- even though that's the risk inherent in a bought deal. In others, regulators issued warnings about material changes after the deals were announced.

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There's been no official word yet on what encouraged Macquarie to back out. The stock had been trading below the $1.00 issue price, so the market could very well have been a factor, but other reasons might be at play.

Whatever the case, it's odd that these situations are becoming more common.

PetroFrontier is based in Calgary, but its assets are in Australia's Southern Georgina Basin.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More


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