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

BlackRock Inc. auctioned C$1.5 billion ($1.36 billion) of restructured asset-backed commercial paper held by investors in the third organized sale of such notes since Canada’s short-term debt market collapsed in 2007.

The weighted average price of Master Asset Vehicle II notes was 94.8 cents on the dollar in today’s auction, BlackRock said on its website. That’s up from 94.3 in the first auction on Dec. 10 in which C$1.5 billion was sold, and 94.4 cents in the Feb. 11 sale for C$1.9 billion of the notes, according to BlackRock data. Those prices are more than double where the securities traded in 2009, according to Colin Kilgour, a partner of Kilgour Williams Group.

Canada’s market for the short-term IOUs not administered by banks 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. The restructuring included matching the maturities of investors’ holdings to the underlying assets that had backed the original commercial paper.

The auctions give investors the opportunity for early redemption of the debt, most of which matures in January 2017.

Investors held about C$10 billion of the restructured debt before the December sale, said Kilgour, whose Toronto-based firm has been advising noteholders. That means about C$5.1 billion remains outstanding.

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