Ant Group’s record IPO suspended

BY Richard Summerfield

The $37bn initial public offering (IPO) of Ant Group was suspended at the eleventh hour on Tuesday in a move which dealt a significant blow to the financial technology firm founded by billionaire Jack Ma.

The company’s listings in Shanghai and Hong Kong were suspended by Chinese authorities citing ‘major issues’ with the filings. The Shanghai Stock Exchange said in a statement that Mr Ma had been called in for “supervisory interviews”, and that a change to the regulatory environment meant Ant no longer met “listing conditions or information disclosure requirements”.

The Hong Kong exchange then reported that Ant had decided to suspend its planned listing. Ant was due to sell about 11 percent of its shares across the two stock exchanges.

That the IPO was called off so late in the process is remarkable given the potential size of the filing. Ant would have recorded a possible market valuation of more than $300bn at its IPO price, placing it among the most valuable companies in the world.

Ant was spun out of Alibaba in 2011, seven years after its parent company was founded. Alibaba acquired 33 percent of Ant’s value in 2018 ahead of its planned IPO. At the time, Ant was valued at around $60bn.

Since the company was spun out, it has enjoyed a meteoric rise. Ant runs Alipay, the leading online payment system in China, which has eclipsed cash, cheques and credit cards. Alipay has over 1 billion annual active users and over 80 million active merchants on the platform.

Alibaba, which had previously broken the record for biggest stock market debut in 2014, saw its share price fall 9.6 percent in Hong Kong trading on Wednesday, following an 8.1 percent fall in New York on Tuesday after the suspension was announced.

News: China slams the brakes on Ant Group’s $37 billion listing

Pacific Drilling opts for Chapter 11

BY Fraser Tennant

Due to significant disruption in the offshore drilling market caused by the coronavirus (COVID-19) pandemic, offshore ultra-deepwater drilling company Pacific Drilling has filed for Chapter 11 bankruptcy protection.

This is the second time the company has filed for Chapter 11 in less than three years, having previously emerged from bankruptcy in late 2018.

Alongside the filing, the Luxembourg-based Pacific Drilling and certain of its domestic and international subsidiaries have entered into a restructuring support agreement (RSA) with an ad hoc group of the largest holders of its outstanding bond debt.

The RSA is intended to eliminate the company’s approximately $1.1bn in principal amount of outstanding bond debt through the cancellation and exchange of debt for new equity. Pacific Drilling expects to emerge from Chapter 11 by the end of the year with access to new capital in the form of an $80m exit facility and with approximately $100m of cash and cash equivalents on the balance sheet.

“After spending months evaluating options for addressing our long term financial needs in light of challenging market and operational conditions, we are pleased to reach agreement that paves the way for an expeditious Chapter 11 restructuring process,” said Bernie Wolford, chief executive of Pacific Drilling.

He continued: “This restructuring is intended to enhance our financial flexibility by eliminating our entire prepetition debt and cash interest burden. We expect to emerge from this process in a stronger position to compete in today’s challenging, lower-commodity-price environment.”

Since the beginning of 2020, the global health crisis caused by COVID-19 and the resulting oil supply and demand imbalance have caused significant disruption in world economies and markets, including a substantial decline in the price of oil. The impact of these market conditions on Pacific Drilling’s business has been direct and significantly negative, rendering its current capital structure unsustainable over the long term.

However, with approximately $120m of cash and cash equivalents, and seven of the most advanced high-specification drillships in the world, Pacific Drilling intends to continue its worldwide operations as usual, deliver services for existing and prospective clients and, subject to court approval, pay all obligations incurred during the Chapter 11 case.

Mr Wolford concluded: “I appreciate the ongoing support of our employees, clients and vendors as we complete this accelerated restructuring process. We remain committed to delivering the safest, most efficient and reliable deepwater drilling services in the industry.”

News: Pacific Drilling files for Chapter 11 to eliminate $1.1 billion of debt

Going private: KAZ Minerals acquired by Nova Resources in £3bn deal

BY Fraser Tennant

In a £3bn deal designed to take it private once again, copper miner KAZ Minerals has been acquired by Nova Resources, a company owned by a consortium comprised of KAZ chairman Oleg Novachuk and Kazakh billionaire Vladimir Kim.

An all-cash-deal, under the terms of the acquisition, Nova Resources will pay the shareholders of London-listed KAZ Minerals 640 pence per share. It is It is intended that the acquisition will be implemented by way of a court-sanctioned scheme of arrangement.

A high-growth copper company focused on large scale, low cost open pit mining in the Commonwealth of Independent States (CIS) region, KAZ Minerals has a track record for the successful delivery of greenfield mining projects. The company employs around 15,000 people, principally in Kazakhstan.

"We are pleased to announce this recommended cash offer for KAZ Minerals,” said Oleg Novachuk, chairman of Nova Resources. “Mr Kim and I believe that KAZ Minerals has made notable progress as a public company since listing on the London Stock Exchange in 2005. However, driven by the current market uncertainty and the corporate circumstances of sequential development projects, we believe that KAZ Minerals' long term interests would be best served as a private company.”

Mr Novachuk is confident that the execution of a higher risk, capital intensive strategy remains the optimal long-term path for KAZ Minerals but recognises that the company’s risk appetite may be misaligned with the preference of many investors in the mining sector.

"Following extensive negotiations, the independent committee of KAZ Minerals intends to unanimously recommend the acquisition to its shareholders as representing an opportunity to realise their investment at a premium in cash in the near term,” said Michael Lynch-Bell, senior independent director and chair of the independent committee at KAZ Minerals. “We believe the offer provides a fair value for KAZ Minerals.”

The acquisition is expected  to be completed in the first half of 2021, subject to the approval of KAZ Minerals’ shareholders, receipt of the relevant antitrust clearances, regulatory approvals and the sanction of the scheme of arrangement by the court.

Mr Novachuk concluded: “In taking this important step, we wanted to ensure that KAZ Minerals’ shareholders were provided with the opportunity to crystallise the value of their investment at a premium valuation. We are confident that this acquisition will deliver an attractive return.”

News: KAZ bosses sign 3 bln pound deal to take miner private again

US denim retailer True Religion exits Chapter 11

BY Fraser Tennant

For the second time in three years, upmarket US denim brand True Religion has successfully emerged from Chapter 11 bankruptcy protection.

The emergence was achieved under a court-approved plan of reorganisation that significantly reduced the company’s debt as well as providing liquidity to execute its growth plans over the next several years.

Founded in 2002, True Religion first filed for Chapter 11 protection in July 2017 during a period when it struggled to adapt to a generational shift in shopping habits, and again in April 2020 when the full impact of the coronavirus (COVID-19) pandemic on retailers became clear.

However, even amid a global pandemic, True Religion’s strong brand identity has enabled the development and confirmation of a plan of reorganisation that paves the way for its continued success.

“We want to thank our loyal and diverse customer base, which remained faithful to the brand both prior to and during the pandemic,” said Michael Buckley, chief executive of True Religion. “We are incredibly thankful and completely indebted to our customers who have showed us consistent support during a period that was challenging in so many ways.”

Mr Buckley, who rejoined True Religion in November 2019 to execute the necessary changes to achieve the company’s full potential across its various channels, previously served as president from 2006 to 2010 during a phase of rapid growth.

“Although we had to make the very difficult decision to lower our overall store count and employee base, our successful emergence from bankruptcy as a stronger company is a testament to the contribution of all of our employees throughout the brand’s history,” added Mr Buckley.

Additionally, collaboration from lenders and other vendor partners in the bankruptcy case also proved pivotal in helping True Religion to emerge from Chapter 11.

Mr Buckley concluded: “The reorganisation has allowed True Religion to reduce its operating costs and lower its debt load, and emerge a profitable, lean operating company with a healthy balance sheet. The path is now clear to continue the reinvigoration of an iconic American brand.”

News: Retailer True Religion emerges from speedy Chapter 11 bankruptcy

Two thirds of UK PE firms embrace ESG, claims new report

BY Fraser Tennant

Almost two thirds of UK private equity (PE) firms now embrace environmental, social and governance (ESG) principles as part of their investments, according to research published this week by BDO LLP.

Increasingly, says BDO, PE firms have to prove that their policies at least match what can be demanding ESG criteria set out by limited partners (LPs), some of whom have been at the forefront of ESG investment for several years.

However, with many PE firms failing to make their full ESG policy publicly available, some risk falling behind, and more work is needed to bring those firms into line with expectations of a broader group of stakeholders.

According to the BDO research: (i) 57 percent of PE firms clearly set out the changes they have implemented to make their investments more ESG-focused; (ii) 49 percent of PE firms are signatories of the United Nations Principles for Responsible Investment (UNPRI), the world’s most-recognised set of ESG principles; (iii) 48 percent of PE firms report in detail on the ESG impact of their investments; and (iv) 25 percent of PE firms have a dedicated individual or team responsible for embedding ESG into the investment process.

“A manager’s ESG approach is becoming an important consideration for LPs looking to deploy capital into PE,” said Jamie Austin, a partner at BDO. “PE firms have made a lot of progress in a short space of time in developing ESG principles and using them to guide their investments. But there is still a way to go and some firms may look increasingly isolated by making no reference whatsoever to ESG.”

Furthermore, the BDO research reveals that investors are looking for PE firms to strengthen the presence of ESG criteria in due diligence processes, with ESG credentials needing to be a fundamental focus of these risk assessments, if firms are to gain the support of investors. 

Mr Austin concluded: “We suspect the next stage is that investors will not just want a commitment to ESG – they will also want tangible proof of how the PE fund has actually delivered on that commitment. The idea that private assets mean little or no public disclosure on important issues like ESG is increasingly being challenged.”

News: Two thirds of private equity houses now take ESG into account, but more progress remains to be made