Challenges & Opportunities Accessing Capital MarketsExclusive Interview with
Steven Khadavi, Dorsey & Whitney LLP
Changes in the regulatory landscape are having a profound impact on companies seeking to access the capital markets. In this exclusive LegalMindsTV interview, Steven Khadavi, Co-Chair of the Capital Markets practice Group at Dorsey & Whitney LLP, discusses some of the challenges these companies face.
According to Khadavi, “companies considering accessing the capital markets need to carefully weight the costs and benefits of these transactions. In addition to being an expensive and time consuming process, it can create a significant diversion of management’s time, as well as add significant burdens in terms of disclosures and regulatory compliance.”
“Accessing the capital markets is a long process,’ says Khadavi. The lead time to commencing a transaction is probably a year or so and in that time you need to “start thinking like a public company.” This includes engaging PCAOB certified auditors and an accounting firm that’s familiar with SEC reporting and be able to go through the capital markets process. Companies also need to consider the impact of the Sarbanes-Oxley Act, which entails large upfront costs for testing internal controls and procedures – particularly the first time around.
Khadavi also explores some of the alternative financing vehicles, such as registered direct offerings and PIPES (Private Investments in Public Equity) which gained a lot of publicity around Warren Buffet’s investments in GE NYSE:GE and Goldman Sachs NYSE:GS, which were both done as PIPE transactions. Though Khadavi believes the market for these alternative vehicles is limited due to S-3 eligibility requirements and the fact that these transactions are typically at a discount to the current market price.
As far as what’s in store for the year ahead, while Khadavi recognizes that 2009 was obviously a difficult year for the capital markets, he believes that 2010 can be a much better year. “We think that capital markets are loosening up and if the IPO market does open up, we expect that there will be a good number of companies that will be accessing the capital markets in 2010 – particularly portfolio companies of private equity companies that have been on the side lines for the last year or so looking for an exit.
View and download a PDF transcript of the full interview here.
Steven Khadavi is a partner in Dorsey’s Corporate group and Co-Chair of the firm’s Capital Markets practice group. He has extensive experience in corporate finance and securities law, as well as mergers and acquisitions.
Mr. Khadavi has represented underwriters and issuers in public and private debt and equity offerings, debt tender offers, consent solicitations, exchange offers and public and private acquisitions. He has represented clients in the United States and abroad in various sectors, including telecommunications, healthcare and consumer products. He also advises clients with respect to corporate governance and Sarbanes-Oxley matters.
George Washington University Law School J.D., 1996, With Highest Honors; Order of the Coif
Clark University B.A., Economics, 1993, With Honors
250 Park Avenue
New York NY 10177-1500
To see a full bio, visit: http://www.dorsey.com/people/detail.aspx?Attorney=180&mode=full
SEC Mandates Use of XBRL for Financial Statements, June 4, 2009
Debt Exchange Lowdown, The Deal, April 4, 2009
“Overcoming the Challenges of New Disclosure Regulations,” SEC Compliance Best Practices: Leading Lawyers on Understanding Disclosure Requirements, Developing Compliance Procedures, and Advising Clients on Reporting Practices (Inside the Minds), April 2009
“Exchange-Offer Alternatives for Issuers of Debt Securities,” Andrews Litigation Reporter, February 10, 2009
Companies Should Look Closely at Risk Factor Disclosure in Light of the Current Financial Crisis, February 10, 2009; A version of this article was republished in the March 2, 2009 Andrews’ Litigation Reporter
“The Viability of Maintaining Successful Actions against the RTC and the FDIC.” Volume 63, George Washington Law Review, 1996
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