Get it right and also the four per cent business C the fees earned through the underwriters and that are shared between your bankers, the brokers and their employer C is much like shooting fish in a barrel.
Get it wrong, meaning the issue is too large or even the price is excessive, and also the buyers steer clear, the fees are reduced.
The latest example of the second situation plays out Thursday whenever a $185 million secondary offering by Sleep Country Canada Holdings closes. Being a secondary, none of the proceeds will flow towards the company. Instead the sellers, Birch Hill and Panzer Ltd., will get a pre-Christmas bonus.
Indeed the two sellers will get what they contracted for, even though lack of investor interest meant the problem needed to be repriced. Instead of selling Ten million shares at $18.50 a share for net proceeds of $177.Six million (or $17.76 a share), the syndicate repriced the deal to market the block at $17.75.
That decision was taken the morning following the deal was announced, a proactive move because the unsold shares were then allocated. It was also timely, because the shares closed Wednesday at $16.52.
After two attempts in an equity financing, Sleep Country is still looking to get it rightSleep Country back with $185M secondary offering, within 180 days of going public
CPPIB and equity
In the field of private equity finance – in which the ultimate goal is to monetize an investment C symmetry also exists: When things are good, they’re excellent, and when they are not, they are horrible.
The Canada Pension Plan, among the country’s largest private equity finance investors, has seen each side of that symmetry.
The fund, which had $272.921 billion of net assets at the end of September, has $55.843 billion committed to private equities, in Canada, in foreign developed markets and in emerging markets. The CPPIB has $142.378 billion committed to public equities.
This month, the spotlight has focused on two of the fund’s high profile private investments: Laricina Energy and Nieman Marcus.
At Laricina, CPPIB made two equity investments, the first in 2010 and also the second twelve months later, investing a total of $350 million in equity and the other $150 million in notes that paid 11.5 per cent. Such as the rest of the oilpatch, things were progressing until the slump in commodity prices.
Last March Laricina, which acted just like a public company C it published its results coupled with a yearly meeting C entered bankruptcy protection.
In December it announced it had completed a settlement agreement to stay the secured debt obligations because of CPP Credit. As a result of that settlement, CPP Credit and affiliates hold approximately 89.0 percent “on a completely diluted basis.”
In September, Ares Management and Canada Type of pension Investment Board spent US$6 billion to get Neiman Marcus Group LTD. The 2 held “an equal economic curiosity about the legendary retailer.”
Last fall the retailer made plans to go public, which were later called off because of market conditions. It planned to use the proceeds to repay its long-term debt estimated at US$5 billion. Now the organization was hit with a multiple whammy: revenue declines in established stores, difficulties in attracting younger and fewer affluent customers, quarterly losses, falling prices because of its bonds with some yielding 15 percent. The result: speculation the planned 2016 IPO is going to be put off even more.