- May 13, 2010
Former leveraged-buyouts about to go public
Despite the recent market volatility, which caused the cancellation or postponement of a number of IPO’s including Russian molybdenum producer Strikeforce Mining & Resources, China’s largest tire company Giti Tire, Chinese ship-maker New Century Shipbuilding, India’s Tara Health Foods and Hong Kong real estate company Swire Properties, there are still a number of major companies that got bought out during the credit boom of past years either in the process of or planning to go public in coming weeks.
HCA recently just filed for an IPO of up to $4.6 billion – which if successful, could make it the third largest one to date, and largest private-equity backed offering, since the financial crisis began.
(An interesting aside in defense of bankers and financial professionals amid the barrage of criticism that they have been receiving on issues of conflicts-of-interest and fiduciary duties is highlighted in this deal which counts the deals lawyers, Simpson Thacher, among the investors in the HCA deal. If politicians perceive bankers to have a conflict-of-interest in buying and selling the same financial product to different customers as they do in the Goldman case, then surely, their logic would extend to the other professional services including lawyers and accountants which have escaped criticism relatively unscathed. The Simpson Thacher lawyers could profit quite handsomely not just from the usual fixed fees to provide counsel and legal advice on the deal but also from the actual price HCA ends up selling for.)
Toy retailer Toys R Us is expected to go public and Nielsen Company, the largest player in the consumer media market research space involved in measuring consumer preferences like TV shows, is also planning an IPO some time this year.
Despite the good intentions, markets have still demonstrated that a successful offering does not necessarily mean continued demand or interest. Ìndia’s Essar Energy demonstrated this last week when it completed its IPO – the largest in London in 2 years – “successfully” but then saw the stock trade 7% below offering.
HCA CDS trades around 500 bps while Nielsen CDS trades around 350 bps. Toys R Us has been a little more volatile having traded between 500-800 bps. The volatility of these CDS prices is partly caused by the overall market volatility of the past week and investors looking to CDS prices in these names for signs of strength (or weakness) in the demand for these offerings may need to wait a little longer for a better sense of the expected trading range of these companies.