Onex Plans IPO for High Yield Debt Fund

TORONTO (Reuters) – Onex Corp (OCX.TO), one of Canada’s leading private equity firms, said on Thursday it would take public a fund that invests in high-yield debt, citing credit market opportunities created by the global financial crisis.

Onex is offering to sell units of OCP Credit Strategy Fund at C$10 each. It did not say how much of the fund was on offer or how much it hopes to raise from the initial public offering.

The fund invests in the senior debt of North American companies that are not investment grade.

“OCP believes that the dislocation in credit markets over the last two years has created an attractive environment for senior credit investors,” Onex said in a statement.

“OCP believes that investment opportunities in the North American senior debt market will continue to be favorable for investors for several years.”

Senior debt wins its name from the seniority it holds over other debt when it comes time for an issuer to pay back loans. If an issuer goes bankrupt, senior debt, often secured by collateral, is in theory the first to be repaid.

Onex said the OCP fund would select investments with: high levels of assets and, or, cash flow coverage; attractive total return potential; and an anticipated company-specific event expected to trigger price appreciation.

Toronto-based Onex said units would pay an annual yield of 7 percent on the original issue price.

The offering was co-led by RBC Capital Markets and CIBC, and includes BMO Capital Markets, Scotia Capital, Dundee Securities, GMP Securities, Canaccord Adams, HSBC Securities (Canada), Blackmont Capital, Desjardins Securities, Manulife Securities, Raymond James, Research Capital and Wellington West Capital Markets Inc.

Onex was formed about 25 years ago, and went public in 1987 as it became Canada’s biggest and best-known leveraged buyout firm. It has bought distressed companies in industries as diverse as electronics manufacturing, health care, movie theaters and cosmetics.

($1=$1.08 Canadian) (Reporting by Pav Jordan; editing by Peter Galloway)