Based in Evansville, IN, Springleaf Holdings (LEAF) scheduled a $360 million IPO with a market capitalization of $1.8 billion at a price range mid-point of $17, for Wednesday, October 16, 2013.
Four other IPOs are scheduled for this week. The full IPO calendar can be found at IPOpremium.
S-1 filed October 7, 2013
Managers, Joint Managers: BofA Merrill, Citigroup, Credit Suisse, Allen & Co; Barclays, Keefe, Bruyette & Woods, Stephens; JMP Securities, Sterne Agee.
LEAF is a consumer finance company that showed losses for 2011 and 2012, followed by a profitable six months for the period ended June 30, 2013.
But LEAF expects a poor September 2013 quarter vs. the September '12 quarter. The rating is neutral to negative.
annualizing June 6 mos
Capital One Financial (COF)
Neutral to negative based on LEAF apparently returning to its pattern of losses in the September '13 quarter. Doesn't look like management knows what it is doing.
To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:
LEAF is a leading consumer subprime finance company providing responsible loan products to customers through a nationwide branch network and iLoan, an internet lending division.
LEAF has a nearly 100-year track record of high quality origination, underwriting and servicing of personal loans primarily to non-prime consumers.
LEAF originates consumer loans through a network of 834 branch offices in 26 states and on a centralized basis as part of the iLoan division.
Through two insurance subsidiaries, LEAF writes credit and non-credit insurance policies covering customers and the property pledged as collateral for loans. LEAF also pursues strategic acquisitions of loan portfolios.
Expects a bad September 2013 quarter
LEAF's preliminary information indicates that third quarter 2013 net income attributable to Springleaf may be lower than second quarter 2013 due to the following items, pre-tax:
$41.2 million of recoveries on charged off finance receivables recognized in the second quarter of 2013, resulting from a sale of finance receivables to an unrelated third party in June 2013.
An increase in provision for finance receivables losses in the SpringCastle Portfolio in the third quarter of 2013 (as compared to the second quarter of 2013). LEAF expects this provision for finance receivable losses to be in the range of $64 million to $67 million in the third quarter 2013, compared to $17.8 million in the second quarter 2013.
A loss of approximately $35 million due to the accelerated repurchase of approximately $184 million aggregate principal balance of outstanding 6.90% medium-term notes, Series J, due 2017.
Non-cash stock compensation expense of $131 million due to the grant of restricted stock units (fully vested at grant) to certain executives in the third quarter 2013.
LEAF operates primarily in the consumer installment lending industry focusing on the non-prime customer. Along with OneMain Financial (subsidiary of Citi Corp.), LEAF believes it is the only remaining national participant of size in the consumer installment lending industry serving the large and growing population of non-prime customers.
LEAF defines national consumer installment lenders to be companies with over 500 branches and with personal loan receivables in excess of $2 billion.
In addition to the direct competitor, LEAF also competes with other consumer finance and internet lending companies, as well as other types of financial institutions within LEAF's geographic footprint and over the Internet, including community banks and credit unions, that offer similar products and services.
5% stockholders' pre-IPO
Initial Stockholder, 92%
FCFI owns 85% of the voting interest in the initial stockholder. Fortress Investment Fund V (Fund A) L.P., Fortress Investment Fund V (Fund B) L.P., Fortress Investment Fund V (Fund C) L.P., Fortress Investment Fund V (Fund D), L.P., Fortress Investment Fund V (Fund E) L.P., Fortress Investment Fund V (Fund F) L.P. and Fortress Investment Fund V (Fund G) L.P. (collectively, the "Fund V Funds") collectively own 100% of FCFI.
Use of proceeds
LEAF expects to net $175 million from its IPO from selling 11.6 million shares. Stockholders intend to sell 8 million shares.
IPO funds are allocated mostly to repay debt.
Disclaimer: This LEAF IPO report is based on a reading and analysis of LEAF's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.