Another week, another sponsor-backed initial public offering. Kosmos Energy Ltd., an oil and gas development company operating off West Africa and owned by Warburg Pincus and Blackstone Group LP, completed an IPO May 11, raising $594 million. The bad news for the sponsors: No money was taken off the table. The good news: Its enterprise value exceeds $7 billion, far above the $4 billion sale price it agreed to with Exxon Mobil Corp. before Ghana scuttled the deal. Today the sponsors' 75% equity stake is worth $5.3 billion. (The two sponsors invested a little more than $1 billion.)

These are happy days for sponsor-backed IPOs. There have been 13 of them so far this year, most of which have performed decently, trading up about 4%, according to Renaissance Capital LLC. Only two, TMS International Corp. and Kinder Morgan Inc., have traded below their offering price, while the top two, Arcos Dorados Holdings Inc. and Nielsen Holdings NV, are roughly 30% over the initial price.

Why? "Investors are more comfortable with high debt levels and growth outlooks for companies in cyclical markets," says Renaissance Capital analyst Nick Einhorn.

There is a general euphoria among sponsors and their bankers about this situation. Buyout firms accounted for 76.5% of the dollars raised via IPOs, says Barclays Capital. HCA Inc. alone raked in $3.7 billion, the largest sponsor-backed IPO ever, breaking a record that was set earlier by Nielsen and Kinder Morgan. HCA is trading close to 15% above its offering price.

Even the laggards, TMS and Kinder Morgan, are hardly disasters.

Onex Corp.-backed TMS went public in April, raising $145.6 million. TMS, which bills itself as the largest supplier of outsourced services to steel mills in North America, sold stock at $13 a share, below its $15 to $17 initial range. TMS closed at $13.45 on May 16.

When it set the price range, Onex hoped to sell 5.67 million shares, cutting its stake to 54%. Instead it sold 1.8 million shares for $23.4 million, reducing its stake from 85.9% to nearly 61%. Still, Onex's TMS position is valued at $298 million, $100 million more than the $198.5 million it invested in 2007.

The other not-so-sad story is pipeline operator Kinder Morgan. The company raised $2.8 billion in its IPO, debuting at $30 a share. The stock has dropped 8.2% since then, closing May 16 at $27.54. Einhorn isn't concerned. "It's a yield play," he says. Kinder is a stable company with high barriers to entry that generates lots of cash and pays an annual dividend.

Kinder Morgan's sponsors have made a killing. The consortium, which includes Goldman, Sachs & Co. and Carlyle Group, emerged with a 192% partly realized gain on $5 billion they sank into a $22.4 billion buyout in May 2007. Kinder sold 95.5 million shares in the IPO, paring their combined stake to 50.1%.

Meanwhile, the two biggest success stories, Latin American McDonald's Corp. franchisee Arcos Dorados and TV market research firm Nielsen, have shown serious growth.

Arcos Dorados' stock debuted on the New York Stock Exchange in April, closing at $21.90 on May 16, 28.8% above the IPO price. Buenos Aires-based Arcos priced at $17 per share, well above the $13 to $15 expected range. The stock has traded between $20.80 and $25.95. Affiliates of Brazil's Gávea Investimentos Ltda. and funds controlled by Los Angeles-based Capital International sold 50 million Class A shares in the IPO.

The IPO's robust performance partly reflects Latin America's strong dynamics, as well as Arcos' strengths. "The company itself has attractive growth trends, based on the rate of restaurant openings, particularly the very profitable McCafés," says Renaissance analyst Stephanie Chang. "Investors liked the combination of a more established business and a new growth franchise" in Latin American markets, she adds.

Then there is Nielsen, which in January sold 71.4 million shares at $23 apiece, above its $20 to $22 per share expected range, raising $1.6 billion. The company closed at $30.90 a share May 16, valuing the 75% stake of its sponsors -- AlpInvest Partners NV, Blackstone, Carlyle, Kohlberg Kravis Roberts & Co. LP and Thomas H. Lee Partners LP -- at about $8.6 billion. The sponsors did not sell shares in the offering. The group acquired Nielsen in May 2006 for €8.9 billion ($12.6 billion) including debt, investing $4.4 billion of equity.

This good news doesn't mean all sponsors are in the money. While bankers say the IPO pipeline continues to be robust, six sponsor-backed companies withdrew their IPO offering, and one postponed it. Most notably Apollo Global Management LLC and TPG Capital's casino operator Harrah's Entertainment Inc. was forced to pull its $530 million IPO in November. "Investors are being selective," says Einhorn.

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