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Securities Offerings
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6/24/2010
Corporate And Government Refinancings Will Trigger A New Credit Crunch
Government debt is on the fast track to super-sized. In both the United States and Europe, nations are borrowing at record levels, trying to fill the gap from deficit spending and needing to roll over existing debt as it comes due. Corporations are in the same boat, facing bonds with rapidly approaching maturity dates. Jonathan Gregson describes what comes next.
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5/3/2010
How Registration Rights For Debt Offerings Changed After Rule 144 Amendments
Rule 144 was amended in 2008, significantly changing the way companies register debt offerings. Attorneys Adam Fleisher and Jung Ju review contingent registration rights and other alternatives to the traditional approaches, and they suggest when the traditional approach may be preferable.
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12/24/2009
High-Yield Bonds Need Well-Designed Covenants
Companies that once would have leveraged loans to refinance their debt are now choosing high-yield bonds. As demand grows, the spread between Treasuries and investment-grade debt has narrowed significantly, Alain Kuyumjian reports, making high-yield bonds (with their less onerous covenants and extended maturities) far less expensive.
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10/29/2009
Universal Shelf Registration Has Advantages (And A Few Disadvantages)
Attorney Valerie Demont reviews the rules on universal shelf registration. Most beneficial to a well-known seasoned issuer, shelf registration permits speedy sales of securities and facilitates the WKSI's flexibility.
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10/29/2009
Secondary Offerings Return (With PIPEs, DRIPs, And Wall Crosses)
Dealmakers planning a secondary offering need to avoid market downdrafts and other pitfalls. With the revival of the equity markets, an increasing number of companies have decided to launch secondary offerings, but Vincent Ryan also reports on alternative means of raising capital: pushing a DRIP, lighting a PIPE, or mastering the wall cross.
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6/24/2009
Seasoned Equity Offerings Are Cheapest On Mondays
Research by finance professors Travis Jones, Xudong Fu, and Tian Tang shows that the day of the week on which an SEO is issued affects its pricing and performance. SEC Rule 10b-21, which prohibits investors from using SEO shares to cover short positions established between the filing and the offering date, encourages this phenomenon.
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4/27/2009
Rule 144A Offerings May Supplant IPOs
Law professor William Sjostrom explains how SEC Rule 144A, promulgated to expedite private offerings to QIBs, has evolved into a central market in unregistered securities. Although this improves their liquidity and increases their attractiveness as an IPO substitute, restricted securities could leak into the public markets, so legislative and regulatory fine-tuning may be necessary.
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2/27/2009
Rights Offerings Could Enjoy A Resurgence
Finance professor B. Espen Eckbo presents the case for using a rights offering to raise capital. While such an offering can be an inexpensive, efficient alternative, it is not the best choice in every situation. The technique works well when many shareholders accept the offer, but it can create problems if participation is low or too many shareholders sell their rights.
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12/2/2008
Tips On How To Issue Debt Under A Universal Shelf Registration
Under recently relaxed SEC rules, universal shelf registration is now open to filers with less than $75 million in public float. For issuers that have never done a public offering of debt, securities lawyer Lloyd Harmetz details the process, including the elements of the indenture, role of the trustee, and the obligations of a subsidiary/guarantor.
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10/7/2008
Avoiding Pitfalls When Drafting Registration Rights Agreements
For attorneys Valerie Ford Jacob, Stuart Gelfond, Michael Levitt, and David Kanarek, the devil's in the details when drafting a registration rights agreement. Highlighting the difficulties fostered by an overly generous grant of rights, they encourage issuers to negotiate against allowing pre-IPO investors to require or participate in subsequent registered sales of securities.
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4/25/2008
Try A Carveout When The Whole Is Less Than The Sum Of The Parts
Doing a partial spinoff, or carveout, can provide the parent with significant benefits. It may be less expensive than borrowing money or selling parent stock, and carveouts that capture investors' imagination can produce startling returns. Vincent Ryan writes of one where the carveout's price-to-cashflow ratio skyrocketed to 116, over 100 points higher than its parent, which still owned most of the unit.
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10/25/2007
Bear Market Can Exaggerate The Response To A Private Placement
Business finance professors Scott Besley, Ninon Kohers, and Tanja Steigner studied the market effect when a public company raises capital through a private placement rather than a public offering. They find the private placement issuer wins a positive market response, regardless of industry or general market mood.
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1/25/2007
Going Public Without Leaving The State
Less expensive and easier to complete than a traditional IPO, the intrastate offering allows a company to sell public stock within its home state without registering with the SEC. Although this exemption has been around for years, relatively few companies use it, Phaedra Hise writes, perhaps because of the consequences of failing to comply with the strict residency requirements.
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10/12/2006
Streamline Reg. A To Encourage Its Use In Small Offerings
For small public issuers, the costs of raising a modest sum in a public offering can be prohibitive. Exemptions are available, but they do not provide a cost-efficient means of raising capital. Regulation A seems a perfect solution, yet it is almost never used: just eight Reg. A filings a year over the last 10 years. Law professor Rutheford Campbell suggests a few simplifications to encourage its easy, inexpensive use.
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8/30/2006
Pros And Cons Of Hybrid Securities
Hybrid securities, such as convertible bonds and preferred stock, are gaining in popularity as a capital-raising method that limits additional balance-sheet leverage and minimizes earnings dilution. Rating agencies have enhanced hybrids' appeal by recognizing their partial equity status, reports Ronald Fink, but some troubling questions of tax deductibility and risk remain.
