Mendoza School of Business

Buyout firms unloading LBOs to flood IPO market

Published: January 7, 2011 / Author: Michael Spears

The following is an excerpt from an article on which quotes finance professor Tim Loughran about how companies controlled by buyout firms face more pressure to go public to pay back the debt from their LBOs.  To read the entire column, visit: Buyout firms unloading LBOs

At the time, funds led by New York-based KKR and Bain Capital LLC of Boston put up about $5.3 billion and borrowed the rest. The Nashville, Tennessee-based company plans to use the proceeds from the IPO to pay debt, which exceeded its cash by $25.7 billion at the end of September.

HCA also borrowed about $1.53 billion in November to fund a cash payout to its private equity owners, meaning that KKR and Bain are selling stakes in a company that would need five years’ worth of the earnings before interest, taxes, depreciation and amortization it generated last year to pay off all the debt, according to data compiled by Bloomberg.

More than $14 billion of HCA’s borrowings are due within three years, according to the company’s SEC filing. In 2010, private equity-backed IPOs had average net debt of about 3.65 times annual Ebitda, the data show.


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