2009 IPO Report - WilmerHale

PIPE and Rule 144A Market Review and Outlook15Company Counsel in Eastern US Rule 144A Equity Placements – 2001 to 2008# of deals Proceeds (in $ billions)Wilmer Cutler Pickering Hale and Dorr LLPSkadden, Arps, Slate, Meagher & Flom LLPSimpson, Thacher & Bartlett LLPLatham & Watkins LLPShearman & Sterling LLPHogan & Hartson LLPJones DayDavis Polk & WardwellJones, Walker, Waechter, Poitevent, Carrere & Denegre LLPSidley Austin LLPWeil, Gotshal & Manges LLPKramer Levin Naftalis & Frankel LLPMcDermott Will & Emery0.92.21.92.42.11.71.63.03.54.34.088877791010111110.3202111.7dropped 61% from 2007 and grossproceeds plummeted by 72%.The number of Rule 144A equityplacements decreased from 123 in 2007to 48 in 2008, while gross proceeds shrankfrom $54.3 billion to $15.4 billion. Averagedeal size also dropped, to $320.5 millionin 2008 from $441.7 million the yearbefore. The number of billion-dollarplacements plunged from 17 in 2007 totwo, as most very large equity placementsin 2008 were structured as PIPE deals.Rule 144A issuers tend to be much largerand more mature than issuers in the PIPEmarket (although, as discussed above, largefinancial institutions flocked to the PIPEmarket in 2008). Companies with marketcaps above $1 billion accounted for 69%of all Rule 144A placements in 2008, butonly 6% of all PIPE deals.The healthcare sector led the Rule 144Aequity market in 2008, with 19% of allThe above chart is based on companies located east of the Mississippi River.Source: PrivateRaisedeals and an average deal size of $296.6million, followed by energy (17% and$284.6 million) and financial services(13% and $314.2 million).In 2008, all but one Rule 144A equityplacement involved the issuance ofconvertible debt securities, essentiallyunchanged from 2007. SEC rules generallydo not permit public companies to offercommon stock in Rule 144A placements,and convertible preferred stock placementshave all but disappeared from the market.Among all Rule 144A convertible debtplacements in 2008, the average conversionpremium was 29%, the average term was11 years, and the average interest rate was4.3%. Warrants were included in only 7%of these placements.Seasoned public companies have longrecognized the faster execution time andgreater flexibility afforded by Rule 144Aplacements. The Rule 144A market declinein 2008 probably reflects overall capitalmarket conditions, as well as the decisionby large companies that qualify as“WKSIs” to structure convertible debtofferings as registered public offeringsrather than Rule 144A placements.