Apollo's Much Delayed Noranda Public Offering Sees 70% Price Cut, As IPO Window Prepares To Slam Shut

One of the most delayed IPOs in the history of capital markets, that of Apollo's Noranda Aluminum, which first was allegedly coming to market in 2008, has finally priced. And it's a stunner: after preliminary expectations for raising as much as $266.7 million (16.66 million shares at $16/share), the company barely managed to attract interest for 30% of this amount, or a paltry $80 million. The 70% reduction in the price is a record for 2010 IPOs and shows that the IPO window in which the Goldman "Idiot Money" Rolodex is put to full use, is pretty much shut. Only this time it wasn't Goldman leading the underwriter brigade: GS was only fourth in the line up of managers. This IPO debacle is exclusively the work of lead manager Bank Of America, which more or less explains the fiasco. If you need a crap REIT upgraded you go with Merrill. Everything else will end in tears. And it also goes to show that if you need to find fools willing to part with their money, Goldman is and always will be the way to go. We are very much surprised Leon Black is not fully aware of this. As a result even pro forma for the IPO, Noranda is still leveraged 5x+, or more than three times its peer universe average. Dear latest money investors: our message to you is to prepare to lose your entire investment within a year.

More from Bloomberg:

Noranda, the maker of rolled coils owned by Leon Black’s Apollo, raised $80 million yesterday after price cuts helped reduce proceeds by 70 percent, Bloomberg data and a regulatory filing showed. Express Inc., the apparel retailer owned by Golden Gate Capital, and Roadrunner Transportation Systems Inc., backed by Thayer/Hidden Creek, fell in their first day of trading, while Carlyle Group’s Niska Gas Storage Partners LLC of Houston has slumped 6.8 percent since its IPO on May 11.

Companies backed by private-equity firms are being forced to take the biggest discounts for their initial sales after leveraged-buyout funds returned less money to clients last year than at any time since at least 2000. LBO firms turning to IPOs were whipsawed as U.S. equity markets fell by the most in a year last week and the Dow Jones Industrial Average suffered the biggest intraday decline since the crash of 1987.

“It’s a buyer’s market, not a seller’s market,” said Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas in Norfolk, Virginia, which manages $1.5 billion. “If an investor is interested in an IPO coming from private equity, they’re going to make sure it’s a cheap pricing.”
The original terms of the IPO would have trimmed Noranda’s debt to $545 million, or about 3.9 times its implied earnings before interest, taxes, depreciation and amortization of $141.2 million over a full year, based on its first-quarter results.

That would have been more than double the median of 1.87 times debt-to-2010 Ebitda for 26 aluminum producers globally, data compiled by Bloomberg show.

Comments

[buzzsaw99]

Breaks my heart. :violin music:

[Mitchman]

The implication of this is that the M&A business is once again going to go into the deep freeze.

[bingocat]

Actually cut by 42-50%, not 70%. Proceeds cut by 70% vs original plan not price. While Bloomberg journalists often get that mixed up, we hope for better from ZH.

Certainly no public image win for Apollo, but as they have probably dividended themselves to a win already (pure guesswork - don't know deal details since buyout), this is probably just the exit of the stub.