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Oaktree IPO, seven others to launch in busy week

Up to $2.2-billion (U.S.) may be raised this week in a series of IPOs slated for U.S. markets.

Mark Lennihan/Associated Press/Mark Lennihan/Associated Press

Private equity firm Oaktree Capital Management kicks off an estimated $2.2-billion (U.S.) of American initial public offerings next week, the busiest flurry of offerings this year.

Eight companies are scheduled to price shares, stirring bankers' hopes that the second quarter will revive a moribund market for public offerings. Proceeds from U.S.-listed IPOs fell 58.4 per cent to $6.5-billion in the first quarter from a year ago, according to Thomson Reuters data.

"We feel constructive about the U.S. economic landscape for equities and IPOs," said Phil Drury, co-head of equity capital markets in the Americas at Citigroup Inc.

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"Overall (U.S.) growth has been recalibrated and … we expect the U.S. will see an increase in IPO volume in the second quarter."

Market trends also are favourable. The S&P 500 stock index is up nearly 12 per cent so far this year and the market volatility tracker VIX index is at five-year lows, indicating trading has become less erratic.

But despite a strong end to the first quarter, which saw successful debuts from companies such as commercial vehicle transmission maker Allison Transmission, organic foods maker Annie's and mobile advertising company Millennial Media, April has been off to a rocky start.

Two of the three deals scheduled to make a debut this week, waste-to-biofuel company Enerkem and Erickson Air Crane, still have not priced.

Meanwhile, Retail Properties of America, a shopping centre real-estate investment trust, priced Wednesday night at $8, below its expected price range of $10 to $12.

So bankers are looking at next week's eight offerings as pivotal to turning sentiment around. The most significant debut is Oaktree Capital Management, which is considered a gauge for the highly anticipated IPO from Washington-based private equity company Carlyle Group later this quarter.

"Oaktree is going to be a litmus test for other such offerings, most notably Carlyle," said David Menlow, president of research firm IPO Financial. "If market sentiment is not up to snuff and the deal falters, it will have been the sacrificial lamb and will cause other offerings in the space to reconfigure their deals."

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Oaktree, which had roughly $75-billion in assets under management at the end of 2011, expects an offering of 11.3 million Class A shares to be priced between $43 and $46 a piece.

Founded in 1995 by Howard Marks and Bruce Karsh, Los Angeles-based Oaktree will raise a net $462.1-million if shares price at the midpoint of the range. If underwriters exercise their option to purchase additional shares, proceeds will top $491.2-million.

Oaktree previously first sold about 13 per cent of itself to its clients in 2004 and then sold 16 per cent of itself for net proceeds of $944.2-million to outside institutional investors in 2007 through a private placement.

Other private equity firms that have gone public are faring will this year. Blackstone Group shares are up 5.8 per cent, Apollo Global Management is up 10 per cent and KKR & Co. is up nearly 10.5 per cent.

Among the other coming issues, aluminum producer Aleris Corp., owned by Oaktree and Apollo, is seeking to price 31.3 million shares at $15 to $17. Aleris joins other industrial companies that have made their debuts in the public markets in recent weeks, including Allison Transmission and industrial parts maker Rexnord Corp.

MRC Global Inc., another private equity-backed industrials company, is set to price on Wednesday.

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The Houston-based company, previously known as McJunkin Red Man Holding Corp., was bought out by Goldman Sachs' private equity fund in 2007. MRC Global is looking to price 22. 7 million shares at between $21 and $23.

The company, which provides pipes, valves and fittings to energy companies, filed for a $750-million IPO in 2009, but pulled its plans.

Other deals slated to price include oil and natural gas development product maker Forum Energy Technologies, based in Houston, and solar thermal power plant developer BrightSource Energy of Oakland, Calif. Pricings for Enerkem, Erickson Air Crane and clean energy company Luca Technologies were also pushed back to this week.

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