Companies push back IPOs over U.S. debt limit uncertainty
(Reuters) - Companies are delaying IPOs and follow-on offerings because of fears that the U.S. government will be unable to avoid a debt default, according to capital markets lawyers and bankers.
Bankers say they are advising some companies to hold off on launching deals for a few days until there is more market certainty.
Even high-profile IPOs like Twitter, which was expected to be launched in the next several weeks, could be affected if the deadlock continues, according to a source familiar with the process.
Twitter could not be immediately reached for comment.
The concern marks a sharp change from last week when many treated the government shutdown and debt-ceiling impasse as non-issues.
But this week the CBOE Volatility index VIX .VIX spiked to 20, a signal of investor anxiety.
"Last week people were still going full steam, but this week there is a little bit more nervousness around the debt ceiling, and that at some point things are going to go too far and it is going to be a problem," said Michael Kaplan, co-head of Davis Polk & Wardwell LLP's global capital markets group.
While oil and natural gas firm Antero Resources increased the size of its IPO and priced above the indicated range this week, bankers say other deals, which are more challenging or by companies that don't have immediate cash needs, have been pushed back.
Bankers declined to identify these companies for concern of endangering their capital-raising prospects down the road.
To be sure, Republicans and Democrats may come to a compromise before the October 17 deadline on raising the federal government debt ceiling. Republicans in the House of Representatives on Thursday unveiled a plan that would raise the debt ceiling and postpone hitting that limit by about six weeks so both sides can negotiate government spending and other issues.
Some bankers also noted worries that the Securities and Exchange Commission may soon run out of funding and will not be able to declare companies' registration statements effective, thus making it impossible for these companies to sell shares to the public.
Companies that are considering postponing their IPOs are weighing such delays against having to wait for third-quarter earnings numbers because any second-quarter financials they disclosed in regulatory filings expire within 135 days and they would have to prepare new financials if a deal is pushed back.
"If you are going to delay your offering because of market volatility, or because of the government shutdown or potential debt ceiling breach, you have to start thinking about the availability of third-quarter numbers," said Michael Zeidel, partner in corporate finance at Skadden, Arps, Slate Meagher & Flom LLP.
Besides the capital markets, volatility is also affecting mergers and acquisitions. Some lawyers say deals are being negotiated with so-called material adverse change clauses that are designed to deal with circumstances unforeseen by buyers and sellers.
"It is being discussed in probably every deal that's out there right now," said Oliver Brahmst, head of White & Case's Mergers and Acquisitions Practice Group for the Americas.
(Reporting by Olivia Oran and Jessica Toonkel in New York; additional reporting by Michael Erman; Editing by Kenneth Barry)
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