BlackRock Auctions C$1.5 Billion of Restructured Short-Term Debt

BlackRock Inc. auctioned C$1.5 billion ($1.41 billion) of restructured asset-backed commercial paper held by investors in the first organized sale of these notes since the Canadian short-term debt market collapsed more than six years ago.

A top-rated portion of the Master Asset Vehicle II notes priced at 96.5 cents on the dollar in today’s auction, administrator BlackRock said on its website. That’s more than double where those securities traded in 2009, according to Colin Kilgour, a partner of Kilgour Williams Group.

Canada’s market for non-bank administered ABCP collapsed in August 2007 on concern that part of the debt was backed by risky U.S. subprime mortgages. More than 100 companies and about 1,765 individuals were stuck with C$32 billion of paper that couldn’t trade until a court-ordered plan to convert the debt into longer-term notes was completed 17 months later.

“It was a highly successful auction,” Kilgour said in a telephone interview. “Clearly, there was pent-up demand for it. There was more demand for redemption than the process allowed.”

Investors held about C$10 billion of the restructured debt before today’s sale, said Kilgour, whose Toronto-based firm has been advising holders of the notes. Investors sold 15 percent of the total amount of outstanding securities, according to BlackRock.

The auction gave investors the chance for early redemption of the debt, which matures mostly in January 2017.

Moelis & Co., the New York investment bank founded by Kenneth Moelis, helped facilitate the latest early redemption process after spending more than two years advising a group of institutional investors on how to unwind the notes.

For investors who bought the securities when they traded closer to 40 cents on the dollar, “this for the first time allowed them to seek liquidity in significant volume,” Kilgour said.

To contact the reporters on this story: Mary Childs in New York at mchilds5@bloomberg.net; Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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