Shares of Freescale Semiconductor Holdings rose in their stock market debut on Thursday, but the value of the chipmaker remains far below the price that buyout firms paid for it at the height of the last credit boom.

Freescale was taken private in 2006 for $17.6 billion by a group of private equity firms including Blackstone Group LP , Carlyle Group and TPG Capital LP.

That deal was the biggest leveraged buyout of a technology company on record, but was criticized because it left the company with lots of debt, hurting its ability to compete in the chip business, which requires lots of investment.

The shares were at $19, 5.6 percent above their IPO price in early afternoon trading on the New York Stock Exchange. The rise came after the company scaled back expectations for its IPO and raised 22 percent less money than anticipated.

Private equity firms, which typically target returns of 20 percent, have been making the most of a runup in stock market values to exit investments by holding IPOs or selling them to cash-rich companies.

Still, the values of some companies have not recovered from the losses they suffered during the recession. Freescale's private equity owners are not selling in the IPO so it is too early to say whether they will make money. But the IPO values the company at far less than the cost of their buyout.

Freescale sold 43.5 million shares for $18 each in its IPO, giving it an implied equity valuation of about $4.3 billion. When including debt, the implied value is about $12 billion.

DEBT WORRIES

One of the biggest concerns for Freescale is its debt. At the end of April, the company had debt and capital lease obligations of $7.6 billion compared with assets of $4.1 billion and cash and cash equivalents of just over $1 billion.

They are in a more tenuous position than other chipmakers, said Brian Colello, a semiconductor equity analyst at Morningstar.

It's a very debt-laden balance sheet in an industry where you don't have a lot of debt-laden companies because it's very volatile and there are a lot of ups and downs, Colello said.

Many investors expect the rollout of new mobile phone networks, booming smartphone and tablet sales, new car electronics and emerging-market economies to fuel the chip industry over the next several quarters. But some analysts worry manufacturers may be installing new capacity too quickly, which could lead to an oversupply and a drop in chip prices.

Freescale plans to use proceeds from the IPO to repay a portion of its debt, to pay fees related to its credit facilities and to pay fees it owes to its private equity owners.

We'll keep doing what we've been doing, which is continuing to drive the business, drive the cash flow, and with the additional free cash flow we'll go back into marketplace and continue to buy back debt on a fairly sustained basis, Chief Executive Rich Beyer said in a phone interview.

Freescale is well positioned for any cyclical downturn -- one driven by the normal ebb and flow of the economy, Beyer added.

There was a surge of buyout-backed IPOs earlier this year, including consumer measurement company Nielsen Holdings , hospital operator HCA Holdings Inc , Florida-based BankUnited Inc and pipeline company Kinder Morgan Inc .

But there are signs that investor interest in private equity-backed deals could be waning. Spirit Airlines , for example, priced at the bottom of its expected range, and is now trading below its IPO price.

Separately, shares of oil and natural gas company Lone Pine Resources , fell in their market debut on Thursday after pricing below the expected range.

Based in Austin, Texas, Freescale makes chips used in cars, mobile phones and e-readers.

Citigroup and Deutsche Bank Securities led the underwriters on the Freescale IPO.

(Reporting by Clare Baldwin and Megan Davies in New York and Noel Randewich in San Francisco. Editing by Dave Zimmerman and Robert MacMillan)