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!LTERYXUS EQUITIES
BOOKRUNNERS: 1/1/2018 TO DATE
Managing No of Total Share
bank or group issues US$(m) (%)
1 Morgan Stanley 88 13,449.58 12.9
2 JP Morgan 107 12,056.50 11.6
3 Goldman Sachs 79 11,495.93 11.0
4 Citigroup 74 9,865.97 9.5
5 Barclays 49 8,433.21 8.1
6 BAML 70 7,326.22 7.0
7 Credit Suisse 50 5,630.27 5.4
8 Wells Fargo 39 4,447.99 4.3
9 Deutsche Bank 32 4,028.17 3.9
10 RBC 38 3,478.44 3.3
Total 447 104,383.21
Including all domestic and international deals and rights issues
Source: Thomson Reuters SDC code: C3rAFG tells investors to frack off
US Once-bankrupt oilfield services firm pulls dealAFG GLOBAL, an oilfield services company that
recently emerged from bankruptcy, balked at
terms presented to it on its IPO on Wednesday
rather than proceed with the stigma of a flawed
process.
The offer presented was 11m shares at US$13
apiece, well below the US$15–$18 on a deal
originally sized at 18.2m shares, that would have
valued it “with a four-handle” on 2019 EV/Ebitda.
“They didn’t like the dynamics of how they
would be perceived in the marketplace,”
explained one banker involved in the
underwriting. “Investors were worried that the
replacement cycle would not be as strong in
2019 as it was in 2017 and the first half of 2018.”
Goldman Sachs, Credit Suisse and Simmons
& Co, the actives of seven bookrunners on the
offering, did attempt to broker a deal. Late in
the bookbuild, they informally lowered price
talk to US$13–$14 in response to investor price
sensitivity.
Secondary sellers led by Carlyle Group, which
had injected part of the US$120m of fresh equitywhen AFG emerged from bankruptcy last June,
responded by pulling a portion of the 12.6m
shares they had planned to sell.
AFG would still sell 5.6m shares to completely
purge its balance sheet, but the sponsors would
wait.
High debt leverage, a universal source of
investor pushback on sponsor-backed IPOs,
was not an issue in this case as AFG had
purged some US$740m of liabilities through
bankruptcy, leaving it with more cash than debt,
and free cashflow positive.
AFG is not alone.
BERRY PETROLEUM, an E&P that emerged from
bankruptcy last year, is touting a similar restart
on its IPO due to price this Wednesday. MESA AIR,
a US regional airliner, is hoping to gain lift from
an IPO later this year, seven years after going
broke.
For AFG, pushback was about operations.
AFG, a long-time portfolio holding of
First Reserves, has high hopes for a new,
technologically advanced hydraulic frackingpressure pumping rig. The 6,000 HP Durastim
rig is three-times more powerful than
conventional rigs, more reliable, and of similar
size.
AFG would exclusively provide aftermarket
services, a lucrative source of repeatable
business but a potential rub for prospective
customers. One banker described the servicing
arrangement as a “closed garden”, akin to Apple
and the iPhone.
“The valuation was compelling if they hit their
targets,” one banker said ahead of the decision
to postpone. “A big part of their growth story is
dependent on customer uptake of their Durastim
hydraulic frac pump.”
AFG was cheap. Annualising expected
second-quarter adjusted Ebitda of US$34m–
$36m on revenue of US$127.2m–$132.4m
marked a low-7s multiple of EV/Ebitda, without
Durastim. That is a steep discount to the 7.7–
11.9x multiples of rivals such as TechnipFMC and
Gardner Denver.
Stephen Lacey