Private placement volume improves; First Avenue Networks wraps deal for $93.3 million

By Ronda Fears and Sheri Kasprzak

Atlanta, Dec. 14 - Private placement volume recovered from the Monday doldrums Tuesday with more deals and bigger offerings up for grabs.

However, some sell-side sources feared the worst for volume given the upcoming holiday.

"Because it is the holiday season, I would expect volume to slow down considerably," said one source.

Another market source agreed with that prediction.

"I think that's fair to say," said the sell-side source. "It's likely that up until the end of the year, things will be slow. I think it's less a matter of the market in general and more because companies will be busy closing out their year. On a less technical note, people will also just be out of the office."

On Tuesday, Canadian private placement volume got a boost from better stocks and higher oil prices.

The Toronto Stock Exchange composite index ended the day up 52.59 at 9085.36.

Thanks to a chill in the air, oil prices closed up $0.81 to end at $41.82 per barrel.

In the United States, First Avenue Networks Inc. offered up the biggest deal of the day with its announcement that it raised $93.3 million in a private placement.

The wireless technology provider sold 12.87 million shares at $7.25 each.

First Avenue, based in Charlottesville, Va., plans to use the proceeds from the deal for its mobile backhaul network initiatives and to develop its fiber extension facilities to metropolitan markets. The remaining funds will be used to repay debt and for general corporate purposes.

On Tuesday, the company's stock closed up $0.05 at $10.50.

NRG deal seen heavily booked

A buy-side market source said the upbeat tone of the Fed and what appeared to be a greater willingness to accept riskier credits probably contributed to the reception NRG Energy Inc. was getting for its new private placement, which was rated CCC+ by Standard & Poor's. Indicative terms on the $400 million convertible perpetual preferred were tightened, and still it was seen last at a trade of 3.5 points over issue price in the gray market just ahead of pricing.

Moreover, buy-side market sources said placement agents on the NRG deal took advantage of the books running heavy to tighten terms. But it did little to dampen enthusiasm.

"It really had no effect because everyone was already expecting that it would get done at the most aggressive end of the price talk range," one convert trader at a hedge fund said.

The dividend range was squeezed to 4.0% to 4.25% from 4.0% to 4.5% and the premium guidance raised to 23.5% to 25% from 22% to 25%.

Hedge funds were not heavy players in the deal, however, at least not on hedge, sources said, because of the tight borrow on the underlying stock. There were several hedge funds participating, though, on an outright basis. Too, there was notable interest from more traditional equity funds.

The Section 4(2) status of the offering, while somewhat confusing to potential buyers at first, was not a stumbling block, sources said. The offering status was designated basically as a means of expediting the offering because a Rule 144A deal would require NRG to disclose pro forma results going back a year, or to December 2003, when it emerged bankruptcy, one sell-side source said. The offering is being made with registration rights, so is expected to trade similarly to a Rule 144A issue within a couple of days of settlement.

NRG as a recently emerged bankruptcy story was a problem for some players, though.

"The NRG deal makes a decent amount of sense," said one hedge fund manager. "But we're not jumping in right now, just because they haven't been out of bankruptcy that long."

NRG 1.7% rich to 2.5% cheap

On the original price talk - a 4.0% to 4.5% dividend and 22% to 25% initial conversion premium - analysts had pegged the new NRG private placement anywhere from 1.7% expensive to 2.5% cheap.

At the middle of the original talk, Merrill Lynch analysts put the new NRG convert 0.8% cheap - or 1.2% rich at the tight end of talk to 2.8% cheap at the wide end - using a credit spread of 500 basis points over Treasuries and a 20% stock volatility.

Another sell-side convert analyst put the issue 2.5% cheap, at the midpoint of original price talk, using a credit spread of 350 bps over Treasuries and a 23% stock volatility.

At 4.25%, up 23%, one buy-side analyst also pegged the new NRG issue 2.5% cheap, using a credit spread of 375 bps over Treasuries and an 18% stock volatility.

Another buy-side analyst put the convert 1.7% rich at the most aggressive end of price talk, or 4%, up 25%, using a credit spread of 500 bps over Treasuries and an 18.5% stock volatility.

"I think using a 350 or 375 bps spread is just ridiculous" for a CCC+ rated convert, said the analyst who thought the issue looked expensive. "I think it will price aggressive, though, because people are more willing to reach right now. The Fed raised rates, the bond market rallied and they see we are close to the end of the line," or year-end.

NRG stock buyback favored

Sources familiar with the NRG story were particularly pleased with the use of proceeds, or, more specifically, the buyback of 13 million shares of common stock.

The Minneapolis-based power generation firm said proceeds would be used to redeem a portion of its 8% senior secured second lien notes due 2013 and to enable NRG to use existing cash balances to repurchase 13 million shares of stock held by investment partnerships managed by MatlinPatterson Global Advisors LLC, at a discount.

After the stock buyback from MatlinPatterson, its stake in NRG will be reduced to a point where it will no longer have a position on the NRG board of directors, according to a market source familiar with the transactions pending from NRG.

NRG issued the $1.25 billion of 8% senior secured second lien notes due 2013 (B2/B+) in December 2003 as it exited bankruptcy; and, in January 2004, a $503.5 million proceeds add-on to that issue was sold. While the redemption price for the 8% notes was not known, market sources pointed out that those bonds were recently seen trading at 110.

NRG also was in-market with a $950 million credit facility (Ba3/BB) with proceeds are earmarked to refinance bank debt, which bank loan market sources said was expected to be a blow out. Pricing on the new credit facility, however, has not been firmly established as it is still in the syndication process.

Genitope plans $57 million offering

Biotechnology company Genitope Corp. announced its plans to enter the private placement market with a $57 million offering.

The deal includes 4 million shares at $14.25 each.

Based in Redwood City, Calif., Genitope is focused on research and development of cancer treatments. Proceeds from the deal will be used to fund costs related to leasing and build out, and qualification of a commercial-scale manufacturing facility. The proceeds will also fund expenses related to manufacturing and potential commercialization, and to establish sales and marketing capabilities, as well as general corporate purposes.

Genitope's stock closed down $0.37 at $14.83 on Tuesday.

Neoprobe sells promissory notes

Neoprobe Corp. raised $8.1 million through a private placement of four-year convertible promissory notes.

The company sold an $8 million note and a $100,000 note to Great Point Partners LLC and Neoprobe president and chief executive officer David C. Bupp, respectively.

The notes bear interest at 8% per year and are convertible into common shares at $0.40 each.

The offering also included received warrants to buy 10,125,000 shares at $0.46 each.

"The completion of this financing will provide Neoprobe with the capital resources to move forward with the clinical development of Lymphoseek and to execute the commercial introduction of the Quantix products early next year," said Bupp, in a statement.

Neoprobe is a Dublin, Ohio-based biotechnology company focused on a line of gamma detection systems used by cancer surgeons. The proceeds from the financing will be used to fund late-stage clinical development for the company's radiopharmaceutical agent, Lymphoseek.

On Tuesday, the company's stock closed down $0.01 at $0.40.

Bank of Orange plans deal

Community Bank of Orange will raise between $2 million and $7 million in a private placement.

The offering includes between 400,000 and 1.4 million shares at $5 each.

The offering is scheduled to close March 15, 2005 but could be extended through March 31, 2005.

"The proceeds of this offering will strengthen the bank, and enable us to better serve our community and grow with our customers," said president and chief executive officer Ronald Gentile in a statement. "We also expect that the new funds will help us to become profitable sooner than that projected in the plan we have filed with our regulator."

Based in Middletown, N.Y., Community Bank of Orange is a community bank.

The company's stock closed unchanged at $7.

i-minerals to raise $2 million

i-minerals Inc. revealed its plans to raise $2 million in a private placement.

The company will issue up to 10 million shares included in 2 million partnership units priced at $1 each. Investors will become limited partners in Helmer-Bovill LLLP, the company's limited liability partnership.

The units are convertible into five common shares at a conversion price of $0.20 each.

The units are callable after March 31, 2007.

i-minerals, based in Vancouver, B.C., mines, develops, mines, processes and markets minerals. The company plans to use the proceeds from the offering for its Helmer-Bovill industrial minerals property.

The company's stock closed unchanged at $0.12.

Avitar closes $1.285 million deal

Avitar Inc. wrapped up a private placement for $1.285 million through the sale of 1,285 series A convertible preferred stock.

The preferreds are convertible common shares at the lesser of $0.12 each or 85% of the average three lowest bid prices for 10 trading days before the conversion notice.

The investors in the deal also received warrants for 600,000 shares at $0.126 per share.

"The Avitar deal looks like it priced in line," said one market source familiar with the deal. "Their stock has been trading in that range, so it should be a good deal for them."

On Tuesday, the company's stock closed unchanged at $0.13.

"This financing is part of our capital funding plan, which we have previously announced," said Avitar's chairman and chief executive officer Peter Phildius, in a statement. "It, along with future financings, will provide the working capital necessary to execute our plan to expand our ORALscreen products business, including the recently announced launch of our second-generation ORALscreen Drugometer product."

Based in Canton, Mass., Avitar develops, manufactures and markets products for the oral fluid diagnostic market, disease and clinical testing and applications for wound dressing. Proceeds from the deal will be used for working capital.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.