PIPE volume remains in slump despite higher stocks; Energy Transfer Partners rakes in $105.6 million

By Sheri Kasprzak

New York, July 26 - Boosted only slightly by an improved stock market, private placement issuance remained light Tuesday after a major surge in volume last week. The fall in issuance has some sell-siders scratching their heads.

"It really is puzzling," said one market source of the seeming drop in issuance. "Demand does seem to be fairly strong for these deals, but I suppose it comes and goes. When you get down to it, it comes to pricing and if an issuer doesn't think they can price at a level they're comfortable with, they're going to wait until they can. That may be where we're at now, but I don't think it's for a lack of interest [in PIPEs]."

Another sell-sider suggested that stocks in some key sectors have not been particularly strong this week.

That source said technology stocks have been pushed down this week by a shaky oil sector. The oil sector, another major source of issuers in the PIPE market, has also been up and down this week, making it more difficult for issuers to price offerings.

A Dallas-based partnership with a portfolio of oil and natural gas assets led news Tuesday with word that it closed a $105.6 million direct offering.

Energy Transfer Partners LP sold 3 million units at $35.20 each to one institutional investor.

The trust units were issued under the company's shelf registration.

After the closing was announced Tuesday morning, Energy Transfer's stock slipped $0.15 to end at $37.15.

John Day, the company's treasurer, did not return calls for comment on the offering, and chief financial officer Michael Krimbill was away for the week when contacted for additional details.

The proceeds from the offering will be used to pay outstanding debt on a revolving credit facility, to strengthen the company's balance sheet and to fund a portion of its capital expansion projects.

According to the partnership's most recent earnings report, released on July 11, the company had 103,884,572 outstanding trust units as of July 1.

The company reported total revenues of $2,031,749,000 for the three months ended May 31 compared to $597,919,000 for the same period in 2004.

Index Development raises $7.5 million

New York-based Index Development Partners Inc. closed a $7,501,000 private placement as it prepares to move to the asset management industry from developing stock indexes.

The company sold 5.77 million shares at $1.30 each to both institutional and individual investors.

After the private placement, the company had 94 million common shares outstanding.

As part of its plans to move to asset management, Index Development plans to change its name to WisdomTree Investments Inc.

"With this new capital and the strengthened management team, the company is moving ahead with its plan to commercialize exchange-traded funds and other financial products based on our proprietary stock indexes," said company chief executive officer Jonathan Steinberg in a statement.

"This financing reflects the confidence and optimism of our directors and solidifies the company's financial position. Over the last seven months, we have raised $16.5 million in a manner that has strengthened both the financial and strategic position of the company. Now we look forward to building a world-class asset management company."

Index Development Partners has not put out an earnings report in almost two years, but the company did turn a profit of $1.1 million in 2002 after reporting losses for the preceding six years.

Banro's C$18.37 million offering

Heading up private placement activity in Canada was a C$18,375,000 offering priced by Banro Corp. The deal was one of two gold offerings in the PIPE market on Tuesday as copper and copper-gold prices continue to climb.

The Toronto-based gold exploration company said it plans to sell 3.5 million shares at C$5.25 each to two institutional investors.

RBC Capital Markets is the placement agent for the deal, which is expected to wrap up on Aug. 3.

"This investment, which secures the necessary funds for our work program through 2006, is a vote of confidence in DRC and in Banro's assets management team," said Simon Village, Banro's chairman, in a statement. "The company's stated objective is to delineate at least 6 million ounces of measured and indicated resources by year-end 2006 and to conduct scoping studies and pit optimizations on our key projects."

One market source who is knowledgeable about the natural resources sector noted that gold prices have been pushed up lately by an increase in copper prices, as well as instability from oil. Mineral exploration companies have dominated Canadian issuance for the past two weeks.

Another gold exploration company, Vancouver, B.C.-based Red Back Mining Inc., completed a scaled-down private placement on Tuesday for C$11.9 million.

The company sold 7 million units - reduced from the initially announced 8 million units - at C$1.70 each.

The units include one share and one half-share warrant. The whole warrants allow for an additional share at C$2.00 each for two years.

Red Back first announced the non-brokered deal on July 11 as part of its drilling program on the Chirano gold project in Ghana, West Africa. The gold exploration company, based out of Vancouver, B.C., had initially planned to sell 8 million units under the same terms.

American Oil's stock continues to rise

A day after closing a $13.5 million private placement of units, American Oil & Gas Inc.'s stock made gains for the second straight session.

The Denver-based oil and natural gas exploration company's stock finished up $0.04 at $5.45.

On Monday, when the private placement closed, the company's stock gained $0.21 to close at $5.41.

The company sold units at $54.00 each. The units include one share of series AA convertible preferred stock and warrants.

Each preferred is initially convertible into common shares at $4.50 each.

One market source familiar with this sector noted that a combination of the cash infusion from the offering and a general rise in oil prices Tuesday may have helped boost American Oil's stock. Oil prices closed up $0.20 to end at $59.20 per barrel.

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