Then the old adage about best laid plans kicked in and just about a week before the spin was set to be completed, the company announced that the spinoff would be ‘delayed’. The company was forced to pull a planned $400m, high yield notes offering for some subsidiaries of the spinco due to ‘adverse market conditions’ and as a result the spinoff was iced. The plan was for the proceeds from the notes offering to be sent to the parent company in order to pay down some of its debt. Although an earlier press release stated that ‘the consummation of the notes offering will not be conditioned on Exterran Holdings’ completion of the separation’, apparently the spinoff was conditioned on the consummation of the notes offering.
Don’t worry though, the company ‘remains committed to closing the spin-off as soon as practicable’ and ‘when determined, Exterran Holdings will announce a new record date and provide an update on its expectations for the commencement of when-issued trading and the distribution date.’
This is truly bizarre and it must be embarrassing for management to have such a late misstep. It also speaks to the pain in the oil & gas space where the company generates all of its business. Given the huge slump in prices, even having long term contracts for a sizable portion of the business didn’t help. If investors appetite for oil & gas debt is waning, it might be some time before this spin gets resurrected. Or it just might be an issue with the high yield market in general. Perhaps the company will scrap the offering or amend it to make it more palatable to investors. Of course, it could also just try and wait it out.
While there have been plenty of IPO’s scrapped due to poor market conditions, I don’t recall any spin being delayed for that reason. This should be an interesting name to watch and hopefully, management will provide some more color on the situation soon. There might be a bigger story in here than just a delayed spin…
Disclosure: Author holds no position in any stock mentioned.