More Companies Are Selling Shares to Help Cut Debt

-- When Metals Acquisition Ltd. bought a copper mine in Australia from Glencore Plc for almost $900 million upfront in 2023, it turned to the debt markets to help fund the purchase.Xi Tells Putin China-Russia Ties Should Last ‘Generations’

“Higher borrowing costs are starting to bite,” said Evgenia Molotova, a senior investment manager at Pictet Asset Management Ltd. “With a high level of uncertainty on interest rates,” it makes sense “to tap the IPO market as that’s opening up, even though the valuations are nowhere near the 0% interest rate super-charged era of Covid.

Quality companies that do come to the market will find willing investors, some of whom are frustrated by the lack of options to put their money to work. In Europe, a lack of primary market activity and rising buybacks means share count is shrinking at the fastest pace in 20 years, according to Barclays Plc.

“With rates staying higher for longer, the reckoning is coming in terms of debt payments,” said Nicole Kornitzer, a portfolio manager at Kornitzer Capital Management Inc. “Private equity needs their money back, so they’ll have to consider IPOs.” Listing allowed them “to go out there and to be very aggressive on the M&A side and that’s why we’ve had 10 acquisitions since the IPO,” Chief Executive Officer Joe La Rosa said in an interview. “As a private company, we would be very much challenged to be able to get some of this financing.”Perfume retailer Douglas AG floated earlier this year in part to reduce debt to support future growth, a spokesperson said, adding the company aims to cut borrowings further.

“Companies that were waiting for rates to go back down to be able to refinance their debt that way — that isn’t going to happen for a long time,” he said. “They don’t really have any choice but to fix that risk on their balance sheet by raising equity. And while the market’s strong, it’s a good time to do it.

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