So Now the IPO Market Picks Up?

Recent share offerings trading well above launch price. Also, Kraft borrows $4 billion, Kodak hit with downgrade, and Sprint dials MTN.


Another day, another few billions of dollars raised in the corporate bond market.

The big capital-raising story, though, took place in the IPO market, which is starting to show real signs of life.

On Tuesday the share price of health-insurer Anthem Inc. stock climbed 13.6 percent in the first day of trading. That’s not too shabby considering the overall stock market fell nearly 2 percent for the day.

Anthem, which raised $1.73 billion from the IPO, is the second company to rake in more than $1 billion in the past few days. Last week, Principal Financial Group Inc. sold $1.85 billion worth of stock.

Anthem, which provides health benefits to more than 7.5 million customers in eight states through Blue Cross and Blue Shield plans, is the sixth-largest IPO this year.

For the first three quarters of 2001, Anthem’s earnings surged to $255 million, up 66 percent from the first nine months of 2000. Revenue climbed nearly 21 percent to $7.5 billion.

The share prices of insurance industry IPOs have gone up about 23 percent on average so far this year, easily making the group the best-performing sector for new issues.

Medical and biotech IPOs remains hot as well. Two more health-care companies are expected to begin trading on Wednesday. Yesterday hospice services provider Odyssey Healthcare Inc. raised $54 million, selling 3.6 million shares at $15 a pop, the high end of the estimated price range of $13 to $15. Odyssey has 37 hospices for the terminally ill in 21 states, with an average of 3,046 patients a day. Merrill Lynch is lead underwriter on the deal.

The big test, however, will come when LogicVision Inc. begins trading on Wednesday, making it the first technology IPO in three months. The chip-testing company, which planned to go public the week of September 17 but postponed due to the terrorist attacks, sold 4.5 million shares at $9 apiece, raising $40.5 million. This was at the low end of expectations.

LogicVision has never turned a profit. In the first nine months of 2001, the company lost $5.6 million on revenues of $11.8 million.

Meanwhile, another tech company is gearing up for an initial offering.

Nassda Corp., a provider of full-chip circuit simulation and analysis software for the design and verification of semiconductors, set its price at $8 to $10 and its number of shares to 5 million in an updated regulatory filing.

In other IPO news, Millennium Bankshares Corp., which has three banking offices in the northern Virginia area, filed plans to go public.

Bonds, Many Bonds

The corporate debt market long ago set a single-year record for new issuance. And on Tuesday, the momentum continued.

Leading the pack: Kraft Foods, which issued $4 billion worth of bonds in three parts. The company offered $1.25 billion in 4.625 percent notes, due 2006. It was priced to yield 105 basis points over Treasurys. The macaroni-and-cheese specialist also issued $2 billion in 5.625 percent 10-year notes. The spread was 120 points over Treasurys. The third tranche of the offering featured a $750 million issue of 6.50 percent 30-year bonds, priced to yield 128 points over Treasurys.

Kraft is expected to use the proceeds to refinance debt and pay intercompany debt to Philip Morris Cos. The offerings were led by J.P. Morgan and Lehman Brothers, and were rated A2 by Moody’s and A-minus by Standard & Poor’s Corp.

In other financing news:

  • Sprint Corp. brought to market $1.75 billion in medium-term notes. The notes, which mature in 2007, were priced at 250 basis points over Treasurys. Sprint’s paper was rated Baa1/BBB-plus.
  • Wachovia issued $1.75 billion of 5-year global notes, led, of course, by Wachovia Securities. The debt offering was rated A1/A.
  • Tenet Healthcare issued $2 billion of paper in a three-part private placement, rated Baa3/BBB. The company issued $550 million of 5-year notes, $1 billion of 10- year notes, and $450 million in 30-year bonds.
  • Sonoco Products Co. issued $250 million in 12-year bonds, led by Banc of America Securities L.L.C. and Credit Suisse First Boston. The company originally planned to raise $200 million. The offering was rated A2/A-minus.
  • Moody’s Investors Service downgraded Eastman Kodak Co.’s long-term debt rating to A3 from A2 and its short-term rating to P-2 from P-1. The long-term rating remains on review for further possible downgrade, according to a Moody’s release. “The downgrade reflects Moody’s growing concerns as to the predictability and profitability of digital imaging, concerns for operating performance in light of the overall economic slowdown, and expectations of ongoing weak operating performance within all of Kodak’s business segments,” noted the release.
  • Moody’s also downgraded the insurance financial strength ratings of five Lloyd’s syndicates and said they remain under review for further possible downgrade. The rating agency cited “growing concerns over the adequacy of resources within the Lloyd’s Central Fund, the market’s mutual support mechanism, and over the strength of the Lloyd’s franchise.”

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