Since the autumn of 2009, as initial public offering activity has fitfully revived, private equity firms have aggressively tapped the market in order to scrounge a bit of gain for their investors, whose PE holdings on balance have tumbled in value since the onset of the financial crisis. A slew of companies that underwent leveraged buyouts have been taken public -- a veritable hit parade of stellar investments that have flourished despite the swooning economy.

In virtually every instance -- from Kohlberg Kravis Roberts & Co.'s Avago Technologies Ltd. and Dollar General Corp. to Cerberus Capital Management LP's Talecris Biotherapeutics Holdings Corp. and Hellman & Friedman LLC's Emdeon Inc. -- the IPOs produced rich returns on paper for private equity houses as demand for the shares surged. No surprise there, for they were their sponsors' very best merchandise.

The same cannot be said of two companies, both semiconductor makers, now being prepped for IPOs.

NXP Semiconductor, owned by a buyout consortium led by KKR and Bain Capital LLC, has already filed to go public, and Freescale Semiconductor Inc., a rival of NXP that Blackstone Group LP and other sponsors own, is actively mulling an IPO, sources say. Both are hard-luck cases. Acquired in 2006 megadeals (NXP for $10.4 billion, ­Freescale for $17.6 billion) for sky-high cash flow multiples and freighted with debt, they suffered staggering losses in 2008 and 2009. As the value of their sponsors' equity investments approached the vanishing point, they emerged as poster children for the outsized, overleveraged and ill-conceived deals that marked the apex of the 2005-2007 LBO boom.

And although the notoriously cyclical chip market has improved markedly this year, neither IPO would seal a triumphant comeback of fortune for the sponsors or yield investment gains.

Rather, the chipmakers' IPOs would further a different agenda: the pressing need to shrink debt.

Indeed, confronted with the alarming prospect of hundreds of billions of dollars of buyout obligations coming due from 2012 to 2014, PE sponsors have worked frantically to scale back debt and push out debt maturities across their portfolios. They mainly have done so via debt-for-debt exchanges and reworked loan contracts.

Now, however, the IPOs of NXP and Freescale may signify the opening of a major new front in the battle to rein in debt. While it's very common for PE-backed companies to use IPO proceeds to pay down debt, it's also true that IPOs meant chiefly or solely to slash debt are relatively rare.

That may be changing.

Consider NXP. On July 23, the Eindhoven, Netherlands-based chipmaker originally spun out of electronics conglomerate Royal Philips Electronics NV announced a tentative price band of $18 to $21 a share for its planned 34 million share offering.

Most striking was what that said about the loss that the sponsors face: At the $19.50 midpoint of the expected price range, KKR and the other sponsors' stake would be worth $3.35 billion -- 25% below the $4.48 billion of equity the PE group invested.

Though that would represent a vast improvement over the 70% loss in value that KKR was estimating a few months ago, it's nothing to celebrate. The IPO's projected valuation -- about 9.7 times trailing 12-month Ebitda, according to CreditSights Inc. analyst Ping Zhao -- serves as a stark reminder of just how much the KKR group, at nearly 14 times trailing Ebitda, had overpaid.

In addition to the sponsors' paper loss, the unpredictability and jitteriness of the current IPO market, along with public investors' distaste for debt-laden issuers, raises questions about the offering's timing.

In the absence of a typical rationale, why would NXP go public now?

"I don't really know the answer because this is not the best time to do an IPO," says CreditSights' Zhao. "But one thing I would suspect is the need to push out the debt maturity" and cut the debt load.

Specifically, NXP says it will use its estimated $620 million of net IPO proceeds to pay down debt, which stood at $5.17 billion as of April 4. It will target bond issues maturing from 2013 to 2015. The paydown will extend NXP's dogged efforts to erase debt via cash buybacks and exchange offers. Since the end of 2008, it has cut its debt by about $1.34 billion.

Freescale, like NXP, has benefited from a powerful upturn in demand for chips as customers replenish depleted inventories. Global sales of semiconductors in May soared 47.6% from a year earlier, to $24.7 billion, according to data cited by Reuters from the Semiconductor Industry Association. Still, Freescale is trying to claw its way out of a cavernous financial hole.

Shortly after the Blackstone-led group, which included Carlyle Group, Permira Advisers LLP and TPG Capital, bought Austin, Texas-based Freescale in late 2006, problem after problem ensued. Freescale, which had been spun off in 2004 from Motorola Inc., was a key supplier of chips for its former parent's then-popular Razr cellphone line. But Motorola didn't have a hot follow-up product to succeed the Razr, and in 2007 its market share began to erode. That same year the auto industry, another major end market for Freescale, slumped as the financial crisis worsened.

From 2006 to 2009, Free­scale's net sales fell from $6.4 billion to $3.5 billion, and adjusted Ebitda plunged by 69%, to $579 million, from $1.86 billion. Cash flow last year barely sufficed to cover interest costs on debt.

Freescale's fortunes have improved of late. Earnings have grown for four straight quarters, and it has generated $929 million in trailing adjusted Ebitda in that stretch. Strategically, Freescale has gained strength by untethering itself from Motorola and unwinding its wireless handset business while focusing more on consumer electronics such as Amazon.com Inc.'s trendy e-reader Kindle.

What's more, Freescale, like NXP, has cut its debt -- from $9.4 billion right after the LBO to $7.6 billion as of July 2 -- and extended maturities via buybacks and exchange offers.

Despite all that, the buyout consortium's equity remains deeply under water. Even if Freescale were taken public at the 9.7 multiple that NXP is shooting for, the sponsors' equity would be worth only about 20% of the $7.1 billion they sank in the deal.

Nevertheless, a successful IPO for both companies would be a promising step, positioning both owner groups on a path to salvaging a chunk of their outlay, maybe even allowing them to eventually break even. For deals as ill starred as these two, that would be real progress.

But as in any IPO, success hinges on valuation. Zhao believes that NXP's hopes in that regard may be unrealistic. She points out that the 9.7 multiple is "much higher" than the shares that better-performing semiconductor makers now trade at. "I think [9.7] is rich. Remember that all these things depend on market conditions," she says. "In today's [market] environment, I don't see how to jus­tify it."

--Christine Idzelis contributed to this report.