Imperial Holdings (NYSE:IFT) is a specialty finance firm that originates loans that are collateralized by life insurance policies. They make money from in the interest charged on loans, on fees from originating the loan, and from fees from referring agents. Imperial Holdings historically took on debt to finance its business. However, the 2008 Financial Crisis significantly increased the interest rate on this debt and so the financing costs of operating rose. Imperial Holdings went public with the intention of using the IPO proceeds to finance operations.
Imperial Holding plans to alter its pre-IPO business plan and refocus. First, it plans to eliminate the use of debt financing to fund its premium operations. The company expects that by relying on debt financing it can improve margins substantially. Next, Imperial plans to eliminate its use of lender protection insurance. This insurance was necessary pre-IPO due to the debt financing, but without the insurance, Imperial save money and be able to originate more loans since the insurance coverage had limits. Finally, Imperial hopes to expand its structure settlement business. A structured settlement consists of an exchange were the recipient of a deferred payment stream sells this stream in return for an single, upfront, lump sum payment. In other words, rather than receive a series of payments spread across into the future, a client of Imperial can exchange this payment stream for a single lump sum. Because it is paid upfront, Imperial pays its client a discounted sum.
The company's initial public offering of stock on the NYSE occurred on February 7, 2011. The company offered 16.7M shares each for $10.75. This was just below the midpoint of the revised range of $10-$12. This brought the final deal to $179M. The deal was originally planned to price in the $14-$16 range which would have made the deal worth $250M. The lead underwriter of the IPO was FBR Capital Markets Corp (FBCM)..
For the full year 2009, Imperial's total revenue was $97M. For the first 9 months of 2010, this total revenue was $60M. Imperial reported a net loss however for 2009 of $8.6M. The first 9 months of 2010 also ended with a net loss of $16.4M. These net losses were caused by a significant rise in the interest expense paid by Imperial. From 2007 to 2008, it increased from $1.3M to $12.8M. From 2008 to 2009, it increased again to $33.8M.