There's a good chance that Griffiths Energy International Inc. will try to test the initial public offering market once again now that the company is dealing with a bribery scandal.
Griffiths was supposed to be a big IPO of 2011, but with concerns about the bribery investigation swirling, the deal was delayed and then finally cancelled about a year ago. Now, Griffiths has agreed to pay a $10.35-million fine after pleading guilty to paying a $2-million (U.S.) bribe to the wife of Chad's ambassador to Canada.
Griffiths' management has always signalled that an IPO is still in the cards. The talk on the street is now that March is likely the timing, and RBC Dominion Securities, which led the last bond financing, will be the lead underwriter.
Assuming the fine is the end of the issue – and it still requires a judge's sign off – Griffiths is likely to be an interesting IPO candidate. Despite the cloud over the company because of the investigation, there has always been a buzz about the assets that Griffiths has in Chad, and the company has had little trouble raising the money it needed in private markets. The company, according to its 2011 prospectus, had production sharing agreements in Chad with about 77-million barrels of proven and possible reserves, plus huge swathes of land to explore.
The company sold $125-million in equity in early 2012 and followed that up with $173.6-million in a convertible bond offering later in the year. That got the company to its $300-million IPO financing target. However, judging by the company's 2011 filing, it could use more money. At that point, the estimate was as much as $400-million of capital spending could be required over the following 18 months. Plus, shareholders who have been stuck in a private investment much longer than expected will be looking for liquidity.
(Boyd Erman is a Globe and Mail Capital Markets Reporter & Streetwise Columnist.)