Pali investment banker sees growth in registered direct offerings

By Stephanie N. Rotondo

Portland, Ore., Sept. 11 - Stephen Bonebrake, Pali Capital Inc.'s new managing director of investment banking, is predicting a growth in registered direct offerings as investors seek registered securities.

"There is a much stronger preference for registered securities versus unregistered securities," Bonebrake said in an interview with Prospect News on Friday. He noted, for example, the number of shelf registrations which have been filed of late, including at least seven that were filed on Thursday.

"We expect an awful lot to middle-market companies to come to market," he said.

"The change we are going to see is investors want you to go to Washington first," he added, meaning companies will need to make those shelf registrations before they attempt to raise equity capital.

The reason for this, he explained, was the "classic liability and asset mismatch." If a company turns downward and an investor holds unregistered securities, it is more difficult to divest those holdings.

"If an investor needs liquidity and they are holding unregistered securities, it's a problem," Bonebrake said.

Still, there will remain room for unregistered offerings.

"It's no secret that companies need to raise capital," he said, noting that many companies "want to do it as privately and discreetly as possible."

And, there are many investors eager to provide financing, though there has been a "pretty big rotation."

Over the last few years, Bonebrake said, there have been a lot of "active buyers of PIPEs." But as the economy turned downward, "a lot of them just are not putting fresh capital back into the market," he noted.

But that has created opportunities for other investors.

"Others are seeing it as an opportunity in a market that is less crowded," he said. "Some [investors] had left [the market] due to the competition and have come back now."

Going forward, Bonebrake believes that the private placement and registered direct markets will continue to grow.

"We're optimistic," he said. "It is a terrific opportunity for the firm and for me."

Pali Capital is a New York-based financial services and investment banking firm.

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