* Saga shares rise slightly after pricing at 185p/shr
* Issue price is at the bottom or 185-245p range
* Conditional dealings start, unconditional set for May 29
* Latest listing to experience IPO market turbulence (Recasts with opening share price performance, adds CEO comment, background and detail)
By Freya Berry
LONDON, May 23 (Reuters) - Shares in Saga Plc, a UK travel and insurance company specialising in the over 50s, rose slightly on their debut on Friday, giving some relief to its crowd of retail investors after the issue price was cut to the bottom of its preset range.
Saga shares were trading on a conditional basis at 188 pence by 0800 GMT, after the company set a price of just 185p on the stock which it had previously priced at between 185p and 245p.
Conditional dealing allows banks and brokerages to trade shares between themselves and stabilise the price of an initial public offering before the stock is available to trade more generally. Unconditional trade starts on May 29.
The issue price valued the company at 2.1 billion pounds ($3.5 billion). Half the stock was bought by institutions such as pension funds and half by retail investors.
Saga had initially looked set for a strong debut because of the strength of its brand and robust finance performance, but the market for flotations in London has lately become more turbulent.
Greetings card retailer Card Factory saw its shares decline after the start of dealings and fashion retailer Fat Face pulled its flotation plans.
Saga had intended to sell both new shares to raise fresh capital to pay down debt and existing shares held by its private equity backers. However the company is now only selling 550 million pounds of new shares.
A source close to the deal said the decision was due to the company's desire to appease its loyal customer base with a firm "aftermarket" performance, at the expense of the private equity groups who had sought to begin selling their investment.
"Clearly there are some tensions," the source said. Saga customers had been asked to pay a minimum of 1,000 pounds to buy into the issue.
The firm is owned by private equity groups Permira , Charterhouse and CVC. Saga had said earlier in the process that Acromas, Saga's parent company which holds a 72 percent stake, was expected to sell shares in the process.
But a sudden turn in the fortunes of company debuts led Saga to focus on selling new shares rather than flooding the market with part of its investor's holdings.
"They (the private equity firms) are barely going to sell. This is the worst-case scenario," said a banker on the deal, adding that the flotation process had been "frustrating".
Acromas was created by the private equity consortium in 2007 when Saga was merged with another investment, the Automobile Association (AA), best known for providing roadside assistance to motorists.
The private equity houses have the option of selling 15 percent of the shares, or 82 million pounds of shares, in an over-allotment or "greenshoe" option should demand prove strong enough.
Otherwise, they are subject to a 180-day lock-up.
CVC declined to comment. No one at Permira or Charterhouse was immediately available for comment.
Private equity firms generally seek to sell their investments after four to six years.
"We have been very pleased with the level of demand for Saga shares from both retail and institutional investors," said Executive Chairman Andrew Goodsell, adding that the offer had been oversubscribed.
Two sources close to the deal said the listing had been oversubscribed by about 3 times, with 1.7 billion pounds of total demand, including 800 million pounds of retail offers.
The listing was run by Citi, BofA Merrill Lynch , Credit Suisse and Goldman Sachs. JP Morgan and UBS were bookrunners, while Investec and Mizuho were co-lead managers. STJ Advisors advised on the deal. ($1=0.5931 pounds) (Editing by Greg Mahlich and David Holmes)