When You Can't Bank On It - Capital Markets - CFO.com

When You Can't Bank On It - Capital Markets - CFO.com

When You Can't Bank On It
Knowing how to do PIPEs, rights offerings, and at-the-market deals could prove a valuable alternative to dealing with stingy banks.

Alix Stuart - CFO.com US
July 15, 2009

Excerpts:

Looking for liquidity? Time to think outside the bank. CFOs who are trying to raise capital — or may need to in the next two years — "need to think about sources they may not have looked at before, because they may be better than fighting the banks," says Peter Humphreys, a partner in the structured finance department at law firm McDermott Will & Emery.

Learning how to do various forms of equity offerings may be among the most helpful skills that finance executives at publicly traded companies can learn, if recent deal flow is any indication. Nearly 250 companies issued about $1 billion through secondary offerings in the first half of the year, up 55% over 2008, according to Thomson Reuters.

And since bankers are shying away from traditional deal marketing and underwriting, that equity is increasingly getting placed through some previously unpopular methods, including PIPEs (private investment in public equity), registered direct deals, rights offerings, and at-the-market offerings.

For the most part, such vehicles allow a company to raise money quickly and quietly, often from a select group of investors, without needing to convince a bank to take on the risk of underwriting the amount to be raised. "All these types of deals are happening because the market for underwritten deals may go away," says Joel Rubinstein, also a McDermott Will & Emery partner. "I don't see the traditional equity markets coming back in the near future, based on conversations I'm having with investment bankers, so I think you'll continue to see a lot of use of these other alternatives, particularly as bank debt starts to mature and people need to have the cash [to repay it]."

Read Full Article: http://www.cfo.com/article.cfm/14030386/c_2984367?f=JacobsExecutiveAdvisors

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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.