Corient could become an RIA deal-making machine again and pursue its ever elusive IPO, after CI Financial moves to wipe out its debt -- now if it can only find a deal

UPDATED: CI Financial Corp. announced today [May 22] that it has “successfully priced” its private offering of $675 million aggregate principal amount of its 7.500% notes due 2029. It will spend about $645. million of the net proceeds to repurchase its outstanding 4.100% Notes due 2051.

Corient, once the nation's hottest RIA roll-up, could be back in the hunt for more acquisitions after an eight-month hiatus -- if it can find a deal, that is. 

"The market is certainly slower than it was when it peaked in 2021. But there are a series of high-quality conversations we're having out there,” CI Financial CEO Kurt MacAlpine told analysts on his company's May 10 conference call.

The company's Canadian parent, CI Financial Corp. (CI), is putting Corient back in the game by erasing some $281 million in debt with a tender offer to sell notes on the private placement market.

The move may begin to clear the decks for Corient to scout out new RIA deals.

Despite all the static, MacAlpine still has his eyes on the IPO prize for Corient and hints that – debt dump-off aside – it's packaged for sale.

“The debt is the final piece of the separation of Canada from the US businesses I mentioned – board, management, day-to-day operations,” he said on the May 10 call.

“The business is fully separable now or essentially IPO ready.”

Deal trigger

The tender offer comes as analysts wonder when CI Financial's Miami-based RIA rollup can again hunt RIA deals aggressively after conspicuously refraining from M&A for the past three quarters, including the current one ended June 30.

Though Corient hasn't done a really big RIA deal in nearly a year, it could do one if it found an RIA too good to pass up. It bought Indianapolis-based Windsor Wealth in October, which managed $1.9 billion.

But the company is screening prospects with extra care, MacAlpine told analysts on the company's earlier, Feb. 23, earnings call.

“The standards of the bar for a firm joining us remains extremely high, and we'll be very disciplined in that process,” he said. 

“There wasn't an acquisition … but we've opted not to do it because we wanted to wait…," he explained.

"We obviously have opportunities. If we wanted to, CI could temporarily lend money to Corient and just clean it up with a bond raise. So it wasn't necessarily that.”

Shares rise

Corient now maintains about $167 billion in AUM offset by $281 million of debt, which is expected to be off-loaded in full to its Canadian parent in January – signaling another fresh start. See: CI Financial will cut off U.S. RIA unit from Canadian cash infusions as part of 2023 IPO but with a giant parting gift -- total forgiveness of its substantial mountain of debt

Toronto-based CI announced today (May 21) in a release that – subject to market and other conditions – it intends to sell senior unsecured U.S. dollar-denominated notes in a private placement to eligible purchasers. 

“We tendered for 100% of our US$900m 2051 notes at roughly 65% of par,” a spokesman writes. “So if everyone submits to the tender we will retire US$900m of debt for ~US$585m, recognizing a large gain for our shareholders.”

Along with the offering, CI commenced a cash tender offer for all of its outstanding 4.100% notes due 2051. 

The announcement sent its shares (CIX.TO) up 1.8%, or 26 cents, to close at $14.72 on the Toronto Stock Exchange. The stock has traded between $12.50 and $17.73 over the past 52 weeks. 

Comfortable debt levels

Indeed, CI Financial considers its debt load to be largely tolerable – precisely because it was in a position to buy back its below-market-rate date on such favorable terms.

“We're very comfortable with our debt levels,” MacAlpine said on the May call. 

"Debt was 3.5 turns. If you net out FX noise, it was 3.4. And if you take a look at the market value of the debt, which is reflective of the price that we can buy back that debt, we're at 2.9 turns. 

“So kind of regardless of the lens that you look at it, we're very, very comfortable with the debt levels that we have in place today.”

CI Financial says it will use the proceeds of its tender offer judiciously, including paying $40 million of a potential cash tax expense in connection with the early retirement of the 2051 notes.

If the tender offer doesn't produce results, it will use the cash to achieve other purposes, according to the release.

“To the extent that the 2051 notes are not purchased in the tender offer, CI intends to use the portion of the net proceeds solely for other repurchases and/or repayments of its existing indebtedness.”

Fresh start

Corient was known as CI Private Wealth before it rebranded last August. 

In 2020 and 2021, it was a non-pareil deal machine and one of the nation's fastest-growing wealth advisory platforms, rising from zero to $126 billion of AUM over those two years. See: CI Financial tops its 2020 MVP year with a grand slam $23 billion AUM January deal but its CEO hints that 2021 is just getting going

But the deal-making stopped after the market tightened, and debt soared to $2.7 billion. 

A planned IPO fizzled, leaving Corient in a lurch. But Bain Capital stepped in with a $1-billion lifeline for a 20% stake in convertible shares, with considerable demands attached, including a 2030 drop-dead date for repayment. See: CI Financial got just the $1 billion face value it wanted for a 20% RIA rollup stake but at a 14.5% PIK, experts warn the deal's terms are brutal

In Nov. 2022, the parent company assumed the $2.7 billion of net debt outstanding, including deferred acquisition payments, 

“Launching our U.S. business debt-free provides us with a unique strategic advantage and maximizes our ability to continue to build on our industry-leading growth, scale, and margin,” MacAlpine said at the time.