Credentials Services Is Latest to Delay IPO

ORANGE — Credentials Services International Inc., a credit information marketer, said Thursday that it has postponed plans to go public until at least mid-January, an action other firms nationwide are taking as well.

With a stock market that hasn’t been favorable to new issues since the big sell-off in October, underwriters for Credentials decided to wait for better times to sell the company’s first stock publicly, said David C. Thompson, the company’s chairman.

Credentials, once part of TRW Inc., also is facing a lawsuit over the terminations of the company’s former president and another former executive. They are seeking, in part, a court order halting the initial public offering. A hearing on the request is scheduled for Jan. 5.

Thompson said the suit played no part in the decision to delay the offering. Instead, he said, market conditions have been so abysmal for young companies with no track records that it has become too difficult for them to get the price they were seeking.

The stock market’s volatility, especially after the major sell-off in October, drove institutional investors, such as pension funds, out of the IPO market, said Ryan Jacob, an analyst for IPO Value Monitor in New York City.

“Institutional investors drive the market,” Jacob said. “If they’re participating, the IPO market can be very buoyant. If they’re sitting on the sidelines, it can be very, very quiet.”

December has been a particularly weak month for pricing as new public companies have been forced to sell their stock at the low end of the range they had sought--or below, said Richard Peterson, a spokesman for Securities Data Corp., a Newark, N.J., investment banker that tracks IPOs.

“Of 28 deals priced this month, none was priced at the high end,” Peterson said. “Underwriters are cutting the prices just to get the deals done.”

Credentials, for instance, is seeking $14 to $16 a share, and analysts figured it wasn’t going to attract many investors even at the low end. It has accumulated $27 million in losses since it was sold by TRW in October 1994.

“There were a lot of deals scheduled heading into December, but everyone expected that with the IPO market so weak, many wouldn’t get done,” said Ken Fleming, an analyst with Renaissance Capital Corp. in Greenwich, Conn.

Institutional investors made a lot of money this year, the analysts said, and they didn’t want to risk it late in the year by investing in small companies with no track records.

In the last quarter so far, they said, the Russell 2000 index of small-cap companies has been down 7.4% and the Nasdaq index has dropped about 10%.

Credentials wants to sell 5.5 million shares, but only 1.05 million of that is new stock offered by the company. The rest is being offered by existing shareholders that have lent the company money.

At $15 a share, Credentials would end up, after expenses, with $13.3 million, barely enough to pay off $12.9 million in debts, plus interest. The company, started as a division of TRW in 1986, was sold and renamed Credentials Services in 1994. Two years later, TRW sold its credit bureau business, which became Experian Inc.

Credentials has a 10-year agreement with Experian to get credit information, which it then translates into reports for customers. Credentials relies on co-marketers, mainly two credit card firms, to supply it with customer lists.