ParaFin Corporation (PFNO)

[zomniac]

Rule 144A Debt as Last-Resort Financing
Abstract:
This paper examines market reaction to the issuance and (subsequent) registration of Rule 144A debt. Risky firms typically issue 144A debt to access financing while avoiding registration. We find that 144A debt offering announcements are associated with significant negative cumulative abnormal returns (CARs), including three-day CARs of -1.238%. To put these three-day negative CARs in perspective, each 144A debt issuer suffers an average loss of 5.38% ($21.2 million) from the amount of 144A debt raised. Further analysis reveals that negative CARs are mainly driven by first-time issuers of 144A debt. Additionally, the negative CARs associated with 144A debt offerings are reversed (i.e., they become positive) following registration of such debt. Finally, our results reveal that firms with large financial deficits, significant financial distress, and more urgent financing needs are more likely to issue 144A debt. Taken together, our findings suggest that firms issuing 144A debt do so as last-resort financing.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2311528