Oct. 13 (Bloomberg) -- Pacnet Ltd., the undersea-cable operator that’s been considering an initial public offering, may instead try to sell itself as stock market swings make a share sale more difficult, people with knowledge of the matter said.
Pacnet, which is being advised by Credit Suisse Group AG and Goldman Sachs Group Inc., hasn’t abandoned a potential IPO, said two of the people, who declined to be identified as the process is private. The company may seek to raise about $500 million in an initial share sale next year, one person said.
Moody’s Investors Service on Oct. 10 cut the outlook for Pacnet’s B1 credit rating to negative, citing “worse-than- expected operating performance” in the second quarter. A month earlier, Pacnet Chief Executive Officer Bill Barney said it was “not a bad time” to explore acquisitions and the company may look at targets in the range of $100 million to $500 million.
Barney said in 2008 that investments by hedge funds had valued the company at about $2 billion. At the Sept. 14 briefing in Singapore, he said Pacnet was considering a listing on the Nasdaq Stock Market in the next two years. That option has been made more difficult by the global stock market rout, two people familiar with the matter said.
A spokesperson for Pacnet declined to comment.
Hong Kong and Singapore-based Pacnet, formed through the merger of Asia Netcom Corp. and Pacific Internet Ltd. in 2008, is owned by an investor group including Ashmore Investment Management Ltd., Spinnaker Capital Ltd. and Clearwater Capital Partners.
Pacnet is spending as much as $15 million on a new content delivery network service over the next five years, and expects 15 percent of its revenue to come from that service over the same period, Barney said at last month’s briefing.
Moody’s, in lowering its outlook for Pacnet’s B1 credit rating, said “intense competition” and falling prices may pressure the company’s cash flow. That may cause Pacnet to “operate at a higher-than-expected level of leverage over the intermediate term,” Moody’s said.
“We expect these challenging fundamentals to persist over the next 6-12 months,” Moody’s analysts Annalisa Di Chiara and Gary Lau wrote in the report. “This situation is likely to impede the degree of deleveraging which we had previously incorporated into the rating.”
A B1 rating is four levels below investment grade.
An IPO would mark Pacnet’s third attempt in as many years to sell shares. In 2008, the company said it planned to raise $500 million to $800 million. Two years later, Pacnet said it expected to raise as much as $800 million.
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