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IPO surge creates debt payoffs, less business for banks

Debt and credit ratings can sometimes affect a company's relations

A recent report from Thomson Reuters and the National Venture Capital Association (NVCA) found that 22 venture-backed IPOs entered the market in 2011’s second quarter.

The head of PricewaterhouseCoopers’ capital markets and accounting advisory practice told American Banker that the rest of the year will likely see similar IPO performance, because at least 77 companies have already filed plans to go public.

With the recent increase in IPO activity, there are generally more lending opportunities, but following the slow recovery from the financial crisis, more businesses are using their money to pay down debts rather than seek out new loans, the news source reports.

Bankrate's chief communications officer, Bruce Zanca, told American Banker that before the company went public, it raised $300 million that it applied to its debts.

Zanca told the news source that Bankrate followed its own advice - pay down debt when you can cut the cost of interest. He said that investors are more likely to acquire or back companies that have low debt, adding that promising to pay off debt with IPO profits quickly improved his own company’s credit rating.

"When someone is looking at a prospective investment, it's nice know they are not going into a company with debt," Craig Miller of the financial services and banking group at Manatt, Phelps & Phillips, told the news source.

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