Credit Suisse Banker Sees ‘Cautious Optimism’ For IPO Exits

John Kolz, managing director of equity capital markets for Credit Suisse Securities (USA) LLC, said he expects a healthy IPO market to continue, pointing to only two deals in the last six months have fallen below their offering price. But the IPO market is moving at a slower pace of about 120 deals a year, down from more than 200 in recent years.

“In the IPO market, the window slams shut,” he said. “When things are good, you’d better rush because it could change. Right now there’s cautious optimism. Things are working but we’re not sure why.”

The $543 million IPO from Intelsat Global Holdings, owned by BC Partners Ltd and Silver Lake, may test the “acceptance of leverage levels” as the company continues its road show to prospective investors, he said.

“It’ll be interesting to watch,” said Kolz. ”Big LBOs have been in a holding period.”

Intelsat, which expects to sell 27.7 million shares at $21 to $25 a share, plans to use its IPO proceeds to pay down debt, which totaled $15.9 billion at the end of 2012.

Jason Gurandiano, managing director at Deutsche Bank, said sponsors continue to weigh exits through initial public offerings or mergers, but cheap debt also makes refinancing an attractive option as well.

With the S&P 500 Index trading at all-time highs, sellers are expecting loftier valuations, but buyers say the overall health of the economy doesn’t feel where it should be, he said.

“Factors seem to be lining up for a robust environment for sellers,” he said. “Also, leveraged markets are as strong as I can remember.”