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Community Choice banks on $230M IPO despite volatility

by David Carey | Published August 24, 2011 at 12:13 PM

In the first such announcement in many days, private equity-backed Community Choice Financial Inc. unveiled plans for an initial public offering of up to $230 million of common shares.

The IPO market, which had boomed much of this year, has all but evaporated after the market's recent dive. Community Choice's filing Tuesday is the first new IPO effort since Aug. 12. That day three companies, including PE-backed Pembroke Realty Capital LLC and Mid-Con Energy Partners LP, filed red herrings with the Securities and Exchange Commission.

Since Aug. 11, shares of only one company, Chinese online video business Tudou Holdings Ltd., have made a U.S. debut.

Community Choice, a Dublin, Ohio, payday lender and check-cashing store operator, said it would use its offering proceeds for general corporate purposes, including future acquisitions and repaying some of its $395 million in debt.

The S-1 filing indicates that private equity owners Diamond Castle Holdings LLC and Golden Gate Capital also plan to sell some shares. They own a combined 75% of the business.

The filing did not say out how many shares they would sell, nor did it spell out their individual stakes.

In early 2006, Diamond Castle bought Buckeye Check Cashing Inc., as the company then was called, for $282 million. The New York firm invested about $85 million of equity for a majority interest, a source said.

San Francisco-based Golden Gate took a stake in April 2011, when Community Choice acquired its portfolio company California Check Cashing Stores LLC for an undisclosed sum.

Golden Gate purchased California Check Cashing for about $115 million in September 2006. The buyout was financed with $85 million of senior debt, sources told The Deal at the time.

Including California Check Cashing's results, Community Choice last year posted $101.9 million of adjusted pro forma Ebitda on revenue of $310.4 million, the filing said. In this year's first half, despite a 19% jump in revenue, income from continuing operations fell 54%, to $15.2 million, due to rising expenses.

Credit Suisse Securities (USA) LLC leads an underwriting syndicate that includes Jefferies & Co., Stephens Inc., JMP Securities LLC and William Blair & Co. LLC.

Jones Day's Christopher Kelly and Michael Solecki represented the issuer. Cravath, Swaine & Moore LLP's Craig Arcella is the underwriters' counsel.

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Community Choice banks on $230M IPO despite volatility

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