HONG KONG (Reuters) - China Everbright Bank (601818.SS) delayed its Hong Kong share offering of up to $6 billion, sources said on Friday, the latest casualty of a rout in global equity markets which casts doubt over billions of dollars worth of other fundraising plans.
World stocks sank for an eighth straight session on Friday, wiping $2.5 trillion off their value on the week, as fears grew that Europe’s debt crisis was spinning out of control and the U.S. economy could face another recession.
“Deals are going to get delayed and are going to be cut in size,” said Philippe Espinasse, a former investment banker with Nomura and UBS in Hong Kong and author of ‘IPO: a Global Guide’. “You’re going to see people revising their expectations.”
U.S. auto and mortgage lender Ally Financial, which is planning a $6 billion initial public offering and was hoping to launch the offering in June, then considered the late summer, has now postponed it until at least September, sources said.
A secondary offering of General Motors (GM.N) shares by the U.S. Treasury also looks likely to be later than anticipated. The Treasury had around $15 billion of remaining shares to sell as of end-July, but GM’s market value is down 10 percent since then, cutting their value to around $13.5 billion.
The U.S. Treasury is also in the process of exiting its investment in insurer American International Group Inc (AIG.N). Its $8.7 billion May share sale accounted for only about 15 percent of its stake in the company. It has billions more worth of stock to sell, but shares are now trading about 14 percent below their May offer price.
AIG Chief Executive Officer Robert Benmosche said on Thursday that he is closely watching the markets as he looks to float the company’s aircraft leasing unit ILFC as an IPO. The IPO could value the company at $8 to $10 billion, a source said previously.
Container leaser China Shipping Nauticgreen was among others shelving IPO plans, said IFR, a Thomson Reuters publication.
“It’s not the right time to do it,” said one Hong Kong-based banker. “I would be cautious to rush the deals out now.”
While there were no big European listings slated for August, with most bankers and investors on holiday, the rout has hit secondary sales and clouds hopes for a September IPO revival.
“We had been looking at a couple of bloc sales if there was a big rally post the debt ceiling (agreement) but ... markets are getting worse not better,” said one London-based banker.
Sentiment in the European listings market, which has seen more than 20 deals pulled this year, has been dented by poor post-IPO performance from all but a handful of companies.
Commodities trader Glencore (GLEN.L), whose $10 billion float is the world’s largest so far this year, has dropped 20 percent since its debut.
Several big deals are due after the summer, including the Spanish state lottery’s 7 billion euro ($9.9 billion) IPO. [ID:nL6E7J21IK]
“We have all got a massive pipeline of deals to launch in the first week of September, but the way the markets are at the moment I can only imagine it is going to be 50 percent done, 50 percent failed,” said the banker.
Siemens may delay the listing of its Osram lighting unit after its valuation plunged, while ING ING.AS said it would not launch the IPO of its insurance operations in these markets and may consider a sale instead.
China’s Everbright in June postponed the launch of the offering because of market conditions and was slated to begin a roadshow next week ahead of a planned listing on August 18, sources with direct knowledge of the plan told Reuters.
The lender, which has secured $1.2 billion from cornerstone investors, could slash the deal to between $2.5 billion and $3 billion, and may head back to the market in September, said IFR.
An Everbright spokeswoman was not available for comment.
The slump in markets could also delay big-ticket secondary share sales in India’s leading state-run companies, which were expected to hit the market in the next few months, bankers said.
The government is now unlikely to meet its target of raising nearly $9 billion through share sales in public sector firms, including explorer Oil and Natural Gas Corp (ONGC.NS) and Steel Authority of India (SAIL.NS), the bankers added.
Prolonged market turmoil could make it difficult for Bank of America (BAC.N) to exit its $17.5 billion holding in China Construction Bank (0939.HK) (601939.SS) when its lock-up expires at the end of August, analysts and bankers said. It had been expected to sell at least half its stake to boost its capital.
“You need some stability in the markets before investors look at deals again,” said one equity capital markets banker. “People are in a capital-protection mode now.”
Equity issuance in the Asia region excluding Japan rose 3.5 percent to $109.1 billion in the first half of the year, the second-highest for the six-month period since 2007, according to Thomson Reuters data. Companies have unveiled plans for IPOs and follow-on deals of nearly $90 billion, the data showed.
Chinese banks and insurers alone plan to raise up to $35.4 billion in share sales in Hong Kong and China by the end of the year, while large nonfinancial deals include a $2.5 billion IPO by China Sinohydro Group, the builder of the Three Gorges dam.
Chinese firms can tap the domestic market, convertible bonds or private placement as other options, said Simon Yuan, Credit Suisse’s co-head of Financial Institutions Group, Asia Pacific.
“But if the market sentiment is really bearish none of this will work and the companies will have to slow down their pace of growth and preserve capital by cutting dividend payouts, etc.”
China Everbright Capital, China International Capital Corp, Morgan Stanley (MS.N), JP Morgan (JPM.N), UBS UBSN.VX, BNP Paribas (BNPP.PA), BOC International, HSBC (HSBA.L) and Shenyin Wanguo were hired to manage the Everbright Bank offering.
Additional reporting by Denny Thomas in HONG KONG, Aipeng Soo in SHANGHAI, Saeed Azhar in SINGAPORE, Sumeet Chatterjee in MUMBAI, Kylie MacLellan in LONDON and Clare Baldwin in NEW YORK; Editing by David Cowell and Tim Dobbyn