HD Supply Said to Raise $957 Million, Pricing IPO Below Range

HD Supply Holdings Inc. (HDS) raised more than $957 million in its initial public offering, pricing the shares below the marketed range, a person with knowledge of the matter said.

The Atlanta-based construction-supply company sold 53.2 million shares for $18 each, said the person, who asked not to be named because the details aren’t public. HD Supply had initially offered the shares for $22 to $25 each, regulatory filings show, and lowered that range earlier today to $18 to $20, according to people with knowledge of the situation.

At the IPO price, HD Supply’s private-equity backers will lose money on their original equity investment. Investors in the buyout paid an average of $19.99 a share for their stake, company filings show. The lower price range coincided with a 3.9 percent decline in the Standard & Poor’s 500 Index in the week through yesterday as investors responded to the U.S. Federal Reserve’s plan to wind down stimulus measures.

HD Supply was taken private in 2007 by Carlyle Group LP, Bain Capital LLC and Clayton, Dubilier & Rice LLC in a deal initially valued at $10.3 billion including debt. The buyout, in the midst of the housing crash, was scaled back to $8.5 billion by the time it was completed two months later.

HD Supply reduced its price range after investors raised concerns over the company’s debt level, one of the people familiar with the matter said. Buyers are concerned that rising interest rates could drag down the growth rate for HD Supply’s business, making it harder for the company to repay debt, the person said.

The midpoint of HD Supply’s original price range would have generated $1.16 billion of net proceeds to the company, which it planned to use to reduce long-term debt to $5.6 billion, filings show. That level still would have exceeded a $4.3 billion valuation for the company’s outstanding stock, data compiled by Bloomberg show.

HD Supply’s offering was led by Bank of America Corp., Barclays Plc, JPMorgan Chase & Co. and Credit Suisse Group AG. The shares will start trading tomorrow, listed on the Nasdaq Stock Market under the symbol HDS.

To contact the reporter on this story: Lee Spears in New York at lspears3@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net

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