Having acquired Tommy Hilfiger in a 2006 LBO, Apax weighed a number of options regarding its exit plan. With Credit Suisse as its lead financial advisor, a near-term recapitalisation in preparation for an eventual IPO in the second half of 2010 was under consideration but Philips-Van Heusen came through with the most compelling proposal.

The deal, a mix of €1.92bn in cash and €400m in Philips-Van Heusen equity, was orchestrated with the help of financial advisors Barclays Capital, Deutsche Bank, Bank of America Merrill Lynch and RBC Capital Markets.

Roughly half of the equity financing will be supplied through a public offering of Philips-Van Heusen common stock plus US$200m in perpetual preferred stock. These securities pay no coupon and convert into roughly 6% of pro-forma shares outstanding at US$47.74.

From an underwriting perspective the deal is net positive as a potentially tricky IPO of Tommy Hilfiger has been replaced by two easier public trades – a US$200m PVH follow-on and a US$200m convertible bond.

The only major change is that Credit Suisse loses the potentially lucrative IPO mandate while league table credit for the smaller follow-on and convertible will be split amongst multiple bookrunners. As with Prudential and AIA, the trade sale is a far better result for ECM bankers than yet another secondary sale to another sponsor.

If successful, the sale will be the first IPO priced within the last six months to bring its first follow-on offering within its 180-day lock up period. While the lock-up provision is designed to protect disgruntled investors, that doesn’t appear to be a problem.

The retailer, which targets the 13- to 17-year-olds who aspires to be “21,” posted same-store sales gains of 7.4% for the 39-weeks ended October 31 2009, and 8.6% for the 13-weeks ended January 30. Combined with new store openings – the company is targeting 100 new stores and 30 conversions for fiscal 2010, on top of 88 openings and 26 conversion in fiscal 2009, there is reason for excitement.

That is reflected in 44% gain in rue21 shares since the IPO, making it one of the top-performing debuts in the last six months.

BofA Merrill Lynch, Goldman Sachs and JP Morgan responded by waiving the selling restriction so the sponsor can capitalise those gains. Meanwhile, Apax will relinquish its majority stake in rue21 as the offering cuts the sponsor’s ownership from 58% to 37% of shares outstanding.

The Belgian nappy and feminine hygiene products manufacturer has appointed Bank of America Merrill Lynch following a beauty parade last week that included a handful of local and international banks.

Market conditions and refinancing plans are expected to determine whether cash-strapped Candover plumps for an H1 or H2 2010 IPO.

There were rumours last July that Candover was considering a sale of the business it bought for €1bn in January 2003. Since then, it has twice replaced the management team (2004 and 2006) and the business has the dubious distinction of being one of the few private equity-owned businesses to be publicly written down in value during the industry’s boom period.

In November 2004, Candover said that it had written down the value of its €400m investment to €100m and that the business was in danger of breaching certain banking covenants.

The restructuring appears to have had a positive impact, however. Candover Investments, the listed parent of the buyout company, said in its 2008 accounts that Ontex had sales of €995.1m and earnings of €99.5m.

The standout among the launches is Promethean World, the maker of interactive white boards. The company is issuing primary to pay back debt and leave it net cash positive and secondary will provide an opportunity for Apax to sell. The company is a well-established market leader in a market that is still experiencing massive growth so the potential return for new investors is good.

However one of the biggest selling factors for the company is nothing to do with its balance sheet, market position and future growth. It is the management. One of the greatest risks is not knowing how a company will adjust to the move from private firm to floated company. This involves communication with investors and also the management of expectations. Both have a massive impact on aftermarket performance.

Comfort for investors comes from chairman Graham Howe, CEO Jean-Yves Charlier and CFO Neil Johnson. Johnson was previously with British Energy during its restructuring and Charlier was CEO of Colt during its turnaround. Howe himself has great market experience – particularly of IPOs – after floating Orange, the mobile operator he founded, twice.

ECM observers will also be interested to see the appointment of Dante Roscini as a non-exec. Sadly the bank that proposed Roscini, a nuclear scientist turned ECM whiz turned Harvard Business School professor, didn’t get on the IPO.

Goldman Sachs and JP Morgan are joint books.

Some commentators rushed to the conclusion that the buyside would not touch evil sponsor-backed deals. Bankers involved in the transaction – perhaps with an eye on their sponsor-heavy pipelines – agreed among themselves to blame “market conditions”. Both conclusions were wrong.

While there is some truth in the assertion that funds pay closer attention to some details when they know sponsors are involved, the notion that they shunned Travelport simply because of this is nonsense – especially when 600 accounts met the company.

And yes, volatility has jumped on the back of a stack of unsettling news – including China reserve requirements, the Volcker rule, poor non-farm payrolls and Greek sovereign CDS. Yes, this will have caused less-committed money to pull back from the new issue market.

But writing off the IPO market is way off the mark. Just two days before Travelport’s deal collapsed, French sponsor-backed firm Medica priced an IPO at the right level, three times covered, and with a positive equity story that investors wanted to buy.

And what exactly happened between that deal and Travelport? The FTSE 100 gained each day and Greek sovereign CDS tightened – hardly grounds for blaming market conditions. After the cancellation, Blackstone completed a US IPO for Graham Packaging.

Travelport’s failure was deal-specific. Investors have little appetite for new issues that are simply to pay down debt loaded on companies by private equity without a compelling growth story. Travelport needed US$2bn to pay down debt to an acceptable level for the public market, and top orders of US$20m were never going to get there.

Private equity may well have to hang on to its less attractive assets for longer than it would like, but that doesn’t mean the IPO market is closed.

This is not a new, friendlier private equity, but a player that has suddenly become desparate. Blackstone purchased Graham Packaging, a plastics container, back in 1998, a 12-year investment horizon that spans multiple capital markets cycles. The firm has tried to sell off the business at least three times in the past decade.

When it did succeed, an IPO, it accepted a valuation in selling 16.67m share at US$10, well off the US$14-$16 price originally targeted. The top of that range, where the firm was willing to offload 6.66m shares, roughly 15% of its holdings, would have returned double its initial investment. As is, it will mark a 25% paper gain and hope it holds up.

CCMP has fared even worse on its investment in Generac, a manufacturer of portable generators. The firm overpaid on its US$2bn (US$689m equity) purchase in November 2006, admitting as much on goodwill impairment charge totallling US$583.5m in 2008. The IPO solidified those losses, at least temporarily, with pricing at US$13.00 above its US$10.50 cost basis.

It would seem its best to take what you can, when you can, and hope for the best in the aftermarket.

A neat illustration as to how untrue this is has been neatly provided by 3i today, as it completed its exit from datacentre business Telecity Group.

In a £96m IPO in October 2007 the company raised £75m, of which £71m went to pay down debt. Same old “private equity is evil” story, yes?

Not quite. The company offered good value and priced the IPO at 220p, only to close its debut at 265p. Even after the tough markets of 2008 and 2009, today’s ABB has priced at 345p to raise £112.8m. Goldman Sachs was bookrunner.

And the full background shows even more divergence from the stereotype. 3i backed the start-up in 1998, originally floated the business in 2000, but then took it private again in partnership with Oak Hill Capital after taking the view that investors’ lack of faith in its prospects precluded a restructuring while it was a public entity.

It is convenient shorthand to blame Travelport’s failure on private equity or Greek CDS, but both are misrepresentive.

Pricing was delayed by one day due to regulatory requirements to re-circulate registration statement on any reduction of more than 20% of the originally amount filed. Graham shares opened Thursday at US$10.00 and gained to US$10.37.

Blackstone Group, which purchased the business 12 years ago, shares in that sensitivity, as the private equity firm pulled a planned sale of 6.66m shares from the IPO. No wonder given that the cost basis for the PE firm and the Graham family is US$8.05, according to the IPO prospectus.

To be sure, Blackstone’s purchase of Graham has been a cicuitous, laboured exercise.  The firm tired to take the company public in 2002, only to be thwarted. In 2008, it reached an agreement to sell the business to Hicks Acquisition Company, a SPAC headed by PE veteran Tom Hicks, for US$3.5bn. Ultimately that offer was rejected by the SPAC’s shareholders.

Now, the most favourable outcome will be to wait in line with newly public shareholders to boost shareholder value through deleveraging, unwinding the point of the LBO in the first place. This too has been damaged by the lowered valuation on the IPO.

Graham Packaging is targeting proceeds from the IPO to repay borrowings on its term loan B (US$590.9m outstanding). Total pro forma debt outstanding drops to US$2.3bn, or five-times adjusted Ebitda generated over the TTM ended December 31. Not bad by LBO standards, but apparently too much for those of IPO investors.

Blackstone still intends to pay itself a ”one-time monitoring” of US$35m. It would seemed to have earned its fee, at least in this case.

Amidst his usual annual pessimism/realism on the likely state of private equity and financial markets this year there were aspects that might make ECM ears prick up:

“I believe the equity markets, after their meteoric rise last year, are likely, at best, this year to be flat. Volatility is also likely to make PE exits more challenging than people are hoping. Meanwhile on the acquisition side of the business, last year’s increase in stock prices means that there will be few bargains to be had.”

“Pets at Home in the UK [which was bought by KKR ahead of a planned float] and Kabel Deutschland here in Germany [which is expected to follow the same path as Pets] seem to indicate that things are picking up. The fact that both have strong debt financing is a good sign, however for many LPs the fact that both would be deals between general partners is far less good as transaction costs will take out 30% plus of the equity if you allow for 20% carry, management incentives and investment banking and financing fees so you end up with the same investment just managed by different people.”

Hands’ latter point is one that was argued a great deal during the champagne vintages of 2005/2006, but it had little impact and Hands clearly doesn’t think the lack of logic in some secondary sales will positively impact the PE-backed IPO pipeline this time.

But many investors, especially in the UK and US, became increasingly concerned about macroeconomic issues such as Greece’s sovereign debt and worsening relations between China and the US. A 5% drop in the Euro Stoxx index, and a steady decline in main peer Croda, also contributed to making investors wary of looking at new stock.

Moving the price range would have had no impact according to sales teams.

It seems like little could have been done differently to yield a different result. So what does this mean for IPOs in the coming months? Macro issues concerning markets are not going to disappear and volatility is therefore likely to remain.

Is it really just a case of accepting that for some the fortnight of bookbuilding will see a benign market but for others the market will kill the deal?

Perhaps we should cross toes as well as fingers in future.

Bank of America Merrill Lynch, Morgan Stanley, KBC Securities and BNP Paribas Fortis were joint bookrunners.