You get the feeling that finance managers are getting ready for the recovery. Whether that recovery actually takes place anytime soon… well…
Nevertheless, a whole lot of companies have filed shelf registrations over the past few days. The list of filers includes German memory chip producer Infineon Technologies. That company filed a shelf registration to periodically sell up to $1.5 billion in debt securities and common stock. The company plans to use the net proceeds for working capital and other general corporate purposes, including capital expenditures and acquisitions.
Finance managers at Sara Lee Corp. also filed a shelf registration last week. The company — which nobody doesn’t like — plans to offer $2 billion of debt securities, warrants, common stock and preferred stock. Sara Lee intends to use the net proceeds for paying off debt, acquisitions, capital expenditures, and working capital.
In addition, CSX Corp. filed a shelf registration last week to issue $1.1 billion of debt securities, trust preferred securities, common stock and other securities.
On the IPO front: management at Overstock.com Inc., an online discount retailer backed by Amazon.com Inc., said it plans to sell as much as $36.8 million in stock in an IPO. The company will use the proceeds for general corporate purposes, which might include marketing, reducing debt and expanding the business. It might be used for other things, as well.
Likewise, executives at AmeriChoice Corp, a healthcare specialist, notified the SEC on Monday that they plan to take the company public in the near future. While AmeriChoice has not yet set a pricing date, the company expects to raise about $115 million in the offering.
Those That Are About to Price
Ten IPOs have actually priced so far this year. That’s not exactly a jaw-dropping total. According to IPO.com, ten IPOs came to market in one week in December alone (the week of Dec. 10, if you’re scoring at home).
On the other hand, 31 companies have filed since Jan. 1 to go public. If the stock markets continue to improve, expect a lot of those filers to actually take the plunge over the next few months.
This week, three companies are set to price their deals. Managers at Anteon International Corp. will likely take that company public by mid-week. The company, which makes IT systems for the U.S. military and intelligence gathering departments, had set the initial price range for the offering at $15 to $17 per share. But on Monday, the company notified the SEC that it will raise that range to $17 to $18 per share.
And why not? While the war on terrorism has roiled the stock markets, it hasn’t hurt the business of black box specialists like Anteon. Indeed, managers at Integrated Defense Technologies (IDT) raised $150 million with an IPO on Feb. 26. The offering price for the IDT deal was $22 per share. The trading price of the Huntsville, Ala.-based IDT shot up to $28 after the IPO. Since then, the markets have been less kind to the maker of electronic and information systems for the U.S. military. Currently, IDT stock is trading below $19 per share.
The other likely IPO-ers this week: Asbury Automotive Group and WCI Communities. Asbury operates 126 franchises at 86 auto dealerships in nine states. WCI develops and builds master-planned communities in Florida. You don’t find so many master-planned communities in Nebraska.
Late last week, the Securities and Exchange Commission settled an action against Raece Richardson and David McKenzie, former executives at Freedom Surf, Inc. The SEC had charged the two with securities fraud for falsifying Freedom Surf’s financial statements.
The Commission alleged Richardson and McKenzie included $5.18 million in fraudulently-valued assets on Freedom Surf’s financial statements filed with the Commission between January and November 2000. The company’s former auditor, James P. Slayton, was charged in a separate administrative proceeding.
Freedom Surf, now known as Freestar Technologies, Inc., is a Dominican Republic-based surfing apparel company.
Besides Richardson and McKenzie, the SEC also charged Cameron Gorges, a friend of Richardson. According to the Commission, Gorges provided a phony appraisal of the equipment to assist the scheme. The action also named Freestar Technologies as successor to Freedom Surf.
Without admitting or denying the allegations in the complaint, McKenzie and Gorges each agreed to a permanent injunction. Under the terms of the settlements, the Court did not order McKenzie or Gorges to pay civil money penalties based on their sworn statements of financial condition and other documents submitted to the SEC.
Richardson is currently a defendant in another securities fraud action that the Commission filed in April 2001.
Other Financings of Note
A couple of big private placements were launched last week. On Tuesday, Weyerhaeuser Co. came out with a $5.5 billion five-part private placement of debt, up from an initially planned $4 billion. J.P. Morgan and Morgan Stanley were the lead underwriters.
In addition, NorthWestern Corp., a Sioux Falls, S.D.-based utility holding company, issued $720 million of senior debt in two parts in the private placement market. The company issued $250 million of five-year notes and $470 million of 10-year notes.
J.P. Morgan Chase issued $1 billion of global notes on Friday, its second big offering in nine days. On Feb. 27, the bank issued $1.5 billion of notes.
The 10-year global notes priced to yield 6.67 percent, or 135 basis points over comparable 10-year Treasuries. Moody’s rates J.P. Morgan’s senior unsecured debt Aa3 while S&P rates it AA-minus.
The asset-backed securities sector saw $7 billion of paper come to market last week, including nearly $3 billion on Friday alone. Wall Street bankers say investors are flocking to this market because of the recent hammering of the corporate bond market, as well as widespread investor concerns about accounting and corporate restatements.
And from our Lest-You-Get-Too-Giddy department. Much was written and said about Friday’s report noting that businesses added 66,000 workers to their payrolls in February. According to the government, the positive numbers ended six straight months of job cutbacks. According to some media observers and pundits, the news also signaled the end of the recession. Break out the Moet. Vintage, no less.
But remember, on average, 150,000 or so new workers enter the U.S. job market every month. So an increase of 66,000 jobs — while welcome news — still means a whole lot of people didn’t find work last month. And while factory orders grew for a second straight month in January, expanding at a 1.6 percent clip, the manufacturing sector lost 50,000 jobs in February. Indeed, some economists now believe the U.S. may be headed for a jobless recovery. Oh joy.
And what does this all mean for finance chiefs? The cost of capital may — emphasize may — start going up the down staircase. Indeed, futures contracts on the Fed’s key federal funds rate indicate that interest rates will climb by at least 25 basis points in June. That would put the Fed fund rate at 2 percent. The guess here, however, is that Federal Reserve Board Chairman Alan Greenspan will not raise the Fed funds rate any time soon. The recession may be bottoming out, but inflation remains low. And the one thing Greenspan does not want to do is to make it more expensive for corporations to borrow money — money that might go for capital projects.