Tuesday, July 31, 2007

Credit Crunches Waste Handler

All the market pundits are offering viewpoints on the recent market correction - voices for the White House call it a “re-pricing of risk,” making those words the most used on television business news since Fed Chairman Greenspan uttered “irrational exuberance.”

Whether it is a re-pricing or a re-assessment of risk, both equity and credit markets are in a period of adjustment. This means that deal financings and structures are up for reconsideration.

Last week I mentioned EnergySolutions in the post “Hazardous IPOs?” EnergySolutions proposes to recapitalize by selling shares of common stock and paying off debt used to finance a roll-up of nuclear waste management providers. CitiCorp provided the $770.0 million in debt financing to make the roll-up happen.

The case puts the current capital markets conundrum into sharp relief. If the deal is postponed, CitiCorp and its group of co-creditors could be put into a bit of a bind. No doubt the original financing bid anticipated a bit of a wait until a public offering of stock could be executed. Yet, how long can Citicorp wait? How long will its co-creditors wait?

Neither the author of the Small Cap Copy
web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

No comments: