Cushman & Wakefield is now a public company. The private equity group that owned it, which included TPG Capital, PAG Asia Capital and Ontario Teachers’ Pension Plan, successfully saddled the hundred-year-old commercial real estate services group with $3.1 billion of debt and raised $765 million last week to pay some of it down.
Last week’s initial public offering of Cushman & Wakefield, which was listed on the New York Stock Exchange under the symbol CWK, has seen the price of the shares go up 4.15 percent, as of this writing, from the initial offering price of $17. The company restructured just prior to the offering from DTZ Jersey Holdings Limited, a Jersey limited company, the entity that filed the registration statement in late June of 2018, to a public limited company incorporated in England and Wales, to be named Cushman & Wakefield plc.
Morgan Stanley, J.P. Morgan, Goldman Sachs & Co. LLC and UBS Investment Bank served as joint book-running managers and representatives of the underwriters for the offering, according to a company statement. Barclays Capital Inc., BofA Merrill Lynch, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and William Blair & Company, L.L.C. also served as joint book-running managers for the offering.
Just prior to the offering, Cushman also announced that China Vanke was added to its ownership roster. China’s third-largest developer by sales invested around $166.7 million for a 4.9 percent stake in the company.
Yet, the biggest news is perhaps the amount of debt with which the company has been burdened. In a Securities and Exchange Commission filing Cushman disclosed that it had $3.1 billion of it as of March 31st, and that around $600 million of the IPO raise would go toward paying down a portion of that and other obligations.
According to a report by MarketWatch, this debt is the biggest among its peers. CBRE has around $1.76 billion of debt, according to a quarterly filing, and JLL is carrying around $719.8 million of it. On top of that, Cushman’s debt also has some pretty strict covenants, which in a certain scenario could make all of its outstanding debt be due immediately.
“Our substantial indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences. For example, it could: make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under such instruments,” the company said in a statement.
On top of that, the company is losing money. In 2016 and 2017, Cushman recorded revenue of $6.2 billion and $6.9 billion, respectively. In those years it also had a net loss of $313.4 million and $170.2 million, respectively. These losses continued into 2018 when the company recorded a loss of $92 million just in the first quarter.
Finally, the firm will remain in the control of its principal shareholders, making it a “controlled company.” The significance of this is that it will not have to comply with certain governance requirements, stated the MarketWatch report, such as having its board directors be independent.
