The SPAC Report - July 2008

New Offerings Sink, but Trading SPACs Ready for Deals

The landscape may be bleak for new SPACs, but an older generation of issuers may benefit, ironically, from the very same market conditions punishing their younger brethren.

The severe environment in the equity and debt markets is preventing many new SPACs from going public. But SPACs that are already trading may see new opportunity to acquire operating companies that are also shut out of the capital markets. A few successful mergers could cultivate a renewed appetite for the alternative investment vehicles later this year, and market insiders point to several promising deals on the horizon.

Equity Favored, Bridge Loans Sporadically Employed

So far this year, financing packages on at least two-thirds of SPAC mergers have been restructured at least once before the deals were approved by shareholders. But these attempts to please investors without alienating sellers have been spotty at best with more than a dozen deals voted down.

Lowering valuations below public comparables, forfeiting insider equity and options, and taking cash and shares off the table up front, while increasing future earn-out potential, have become standard. Some deals have included contingent value rights, which essentially promise to reimburse shareholders if there is a drop in price during a period of time.

Bondholders of Graham Packaging Holdings Co. are angry that they won't be bought out as part of the plastic container maker's pending merger with SPAC Hicks Acquisition Co. I.

On an investor conference call, bondholders expressed confusion over Graham's and Hicks' assertions that change-in-control provisions in Graham's credit agreement and bond indentures will not be triggered by the acquisition.

• Energy Infrastructure Shareholders Dispute Liquidation Value
• Global BPO Increases Tender Offer
• Israel Growth May Seek Shell Merger
• Asia Special Situation Merger Moves Ahead Despite CEO Dispute
• Tiny SPAC to Target Retail Investors
• Ascend to Become Shell After Liquidation
• Market Drives SPACs to Withdraw
• Hirings & Firings

• SPAC Tracker
• SPAC IPOs in Registration
• First Half 2008 SPAC Rankings