IFR 02.29.2020

8 International Financing Review February 29 2020

Top news

GFL recycles IPO pitch as markets tumble

„ Equities Rubbish collector returns with lower leverage and better financials

BY ANTHONY HUGHES

GFL ENVIRONMENTAL is forging

ahead with a revamped

US$2bn-plus IPO less than four

months after pulling an earlier

version of the deal, but a

hostile fund-raising backdrop

threatens to stymie its

ambitions.

The Canadian waste

management company is hoping

ITSûIMPROVEDûlNANCIALSûANDû

lower leverage will convince

investors to pay a price at the

lower end of the marketing

range unsuccessfully pitched in

November.

Though other US IPO

aspirants opted against starting

their roadshows last week as the

VIX surged to a deal-killing 40-

plus, GFL bucked the trend early

on Tuesday (when the VIX was

already around 28) by launching

a NYSE/TSX IPO of 73.2m shares

marketed at US$20–$21 each.

GFL delayed the launch by a

day as the DJIA tumbled more

than 1,000 points (or 3.6%) in

Monday’s session, but rather

THANûPRODUCEûAûREmEXIVEû

rebound, stocks were mired in

correction territory, ending

Thursday more than 11% lower

than where the Dow ended the

previous week.

The new marketing range is

within the US$20–$24 spread

on November’s failed sale of

87.6m shares, an effort that

was pulled late in the process

by GFL’s lead sponsor BC

Partners when orders came in

ATûLEVELSûSIGNIlCANTLYûBELOWû

that range.

MANDO TOPS UP

GFL is compensating for the

smaller IPO deal size this time

around by adding a concurrent

US$700m mandatory

convertible bond that taps a

different type of investor.

The MCB is being marketed

with a 5.75%–6.25% coupon and

17.5%–22.5% conversion

premium.

JP Morgan, BMO Capital

Markets, Goldman Sachs, RBC

Capital Markets and Scotiabank

are again leading the syndicate

marketing both GFL’s IPO and

the MCB, with a shorter-than-

USUALûlVEûDAYSûOFûMARKETINGû

ahead of pricing post-close on

March 3.

“They were just out

marketing in November so

they have interest already,”

one banker close to the deal

said.

Another banker said the deal

was “spoken for” at launch.

Yet by Thursday’s close, the

stock prices of GFL’s four direct

comps (Waste Management,

Republic Services, Waste

Connections and Casella Waste

Systems) had fallen an average

of 6.4% for the week, increasing

the risk that price sensitivity

forces GFL to price below range.

DELEVERAGING PLAN

GFL’s offerings would raise

US$2.2bn at midpoint pricing

with the bulk of proceeds

earmarked to cut leverage.

Under CEO Patrick Dovigi,

GFL has been highly

acquisitive, buying several

businesses in the short period

SINCEûTHEûlRSTû)0/ûATTEMPTûWASû

aborted. The company also

raised US$360m in equity from

Hong Kong IPOs go virtual

„ Equities Virus outbreak makes face-to-face meetings impossible

BY FIONA LAU

At least two Chinese issuers are

marketing Hong Kong IPOs

virtually, setting a template for

what could become standard

practice if the coronavirus

outbreak lasts for months.

CHINA BRIGHT CULTURE GROUP last

Thursday opened books for an

IPO of up to HK$1.35bn

53M    ûTHEûlRSTû53M

PLUSûmOATûINûTHEûCITYûTOûCONDUCTûAû

virtual roadshow. The deal is

being marketed to investors

through telephone and video

conference calls. No face-to-face

meetings will be held with the

management, which is currently

in Beijing.

“The outbreak could last

longer than people have

expected as the virus is

spreading to more and more

countries. We can’t just sit there

to wait for the epidemic to be

OVERûWEûNEEDûTOûlNDûAûWAYûTOûDOû

business,” said a banker on the

deal.

Fittingly, the issuer is a

producer of video programmes

and its whole IPO process,

from pre-marketing to

bookbuilding, has been moved

online. Many investors do not

want in-person meetings, and

travel restrictions remain in

place for Chinese citizens and

those who have recently been

to China.

Instead of the traditional

investor luncheon, Bright

Culture held a net roadshow,

featuring presentation slides

narrated by the company

management. Calls are

arranged for investors who

want to ask follow-up

questions.

The company also held an

online press conference for

journalists. Chairman Liu Mu

said he would not attend the

listing ceremony in Hong Kong

on March 13, after discussions

with the stock exchange and to

comply with the quarantine

measures in Hong Kong. Hong

Kong has imposed a mandatory

14-day quarantine on all

visitors from mainland China.

“Investors seem to take the

new format well and we don’t

think it will affect demand. We

actually have more time to talk

to investors now without all the

travelling,” said another banker

on the deal.

The books were covered after

THEûlRSTûDAYûOFûBOOKBUILDING

MORE TO COME?

Bankers reckon more IPO

candidates will take the virtual

route as some of the current

ONESûWILLûSEEûTHEûlNANCIALSûINû

their applications expire in

March.

“Some companies may choose

to bring the deals to the market

in March instead of updating the

lNANCIALSûASûITSûBASICALLYû

impossible for auditors to do any

work in mainland China right

now. Updating the numbers

could take months and the deals

could slip into the second half,”

said the second banker.

Chinese biotech INNOCARE

PHARMA is next in line. The

clinical-stage company is

planning to start pre-marketing

a Hong Kong IPO of about

US$200m on Monday. Again, the

deal will be marketed entirely

through video or telephone calls.

However, poor market

We can’t just sit

there to wait for the

epidemic to be over,

we need to find a way

to do business”

GFL delayed the launch

by a day as the DJIA

tumbled more than

1,000 points (or 3.6%)

in Monday’s session,

but rather than produce

a reflexive rebound,

stocks were mired in

correction territory

4 IFR Top news 2322 .p 4 - 14 .indd 8 28 / 02 / 2020 19 : 41 : 47