IPG Shares Tumble 5.6%

NEW YORK Interpublic Group shares fell sharply in unusually heavy trading today after the company disclosed a complicated new credit arrangement yesterday following the market’s close.

IPG’s beleaguered stock closed at $9, off nearly 5.6 percent on volume of 29.1 million shares, nearly 10 times the average daily volume. During the day, the stock dipped to $8.86, down 2.4 percent from the company’s 52-week low of $9.08.

Under the credit plan, IPG will enter into an agreement with a special-purpose entity called ELF Special Financing Ltd. for an offering of three-year notes and warrants. The total size of the offering is $526 million, with a 15 percent over-allotment option. The offering will relieve the company of some of its restrictive bank covenants, with the potential dilution amount also relatively low and able to be eliminated by cash settlement, according to Merrill Lynch analyst Lauren Rich Fine.

“On the positive side of the ledger, IPG gains added flexibility, modest P&L impact, and lower cash interest costs; on the negative side, the deal adds a level of complexity that arouses some suspicion as to its motive,” Fine wrote in a research note. “However, the offering will add complexity to a story that is just now getting simpler. The exact P&L impact is uncertain at this point, given the complexity of the deal and the unknown pricing.”