Succession Question as Icahn Raises Capital

Chidem Kurdas

One gets the sense that Carl Icahn, aged 76, is not all that interested in retiring to the golf course.

In January he added $1.2 billion to the capital he deploys in activist investing. That partly compensates for the $1.8 billion he returned to outside investors in 2011. With some increase in leverage, he could have almost as much money to invest as he did before he bid adieu to the outside investors.

The additional $1.2 billion consists of $700 million debt and $500 million equity.  Moody’s rated the senior unsecured notes Ba3 with a stable outlook. By contrast, in 2010 the rating agency had a negative outlook on Icahn’s debt—the prospects improved roughly in tandem with economic and market conditions.

Mr. Icahn himself figures on both sides of the ledger in assessing his firm’s future. On the positive side, his long-time track record and expertise as an activist investor underpins the stable outlook. On the other side of the ledger, it is not clear that somebody else is ready to fill his shoes if necessary.

“Succession planning is a potential concern due to the company’s dependency on Mr. Icahn to execute strategies and trigger change as an activist investor,” Moody’s analysts point out.

Then again, if the octogenarian Mick Jagger can still rock, no reason Mr. Icahn can’t continue raging at corporate inefficiencies and extracting value from corporate balance sheets for years to come.

The key-main risk does not appear to have hindered capital raising. Judging from the new capital structure, Mr. Icahn is expected to go on doing his thing at least till January 2018, when the notes come due.

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