NRG Energy leads PIPE offerings with $250 million preferreds; volume picks up

By Sheri Kasprzak

New York, Aug. 11 - NRG Energy, Inc. was one of two PIPE offerings to reach or surpass $200 million on Thursday, an accomplishment the company shared with Global Alumina's $200 million stock deal.

NRG, the Princeton, N.J.-based power-generation facility operator, sold 250,000 shares of 3.625% preferreds at $1,000 each to Credit Suisse First Boston Capital, LLC for a total of $250 million.

The preferreds have a 50% initial conversion premium and will be used to redeem $228.75 million in principal of its outstanding 8% notes. The remainder of the proceeds will be used for general corporate purposes.

The preferreds are convertible for 90 days beginning Aug. 11, 2015 at the greater of the difference between the closing sale price of the company's stock on each of 20 consecutive trading days, beginning the 30 days immediately before conversion and $59.085, 150% of the initial stock price.

"This accelerated share repurchase provides an efficient, meaningful and immediate return of capital to shareholders, while maintaining, and even enhancing, our capital structure," said David Crane, the company's president and chief executive officer, in a statement. "While we expect to be able to reinvest our capital in enhancing our asset portfolio, this decision to repurchase shares and notes is a sensible and efficient use of capital at this time."

Crane did not return calls for additional comment on the offering by press time Thursday.

As of June 30, the company had $1.35 billion in outstanding principal on the 8% second-priority senior secured notes.

For the quarter ended June 30, the company reported a net income of $23,866,000, down from $83,024,000 for the corresponding quarter in 2004.

According to the company's latest earnings report, NRG had 87,047,034 outstanding common shares as of Aug. 3.

The company's stock slid $1.03 to close at $38.36 Thursday.

In the broader market, market sources said volume improved somewhat as the stock market made a comeback Thursday.

"We're seeing more and more," said one sellside source. There's "still lots of those biotech deals from earlier in the week. [There's] not nearly as many as there have been, but they're still lingering."

Canada's PharmaGap was among the biotech companies in the market on Thursday, announcing an as-yet-priced C$2 million unit deal and a C$1.5 million note offering it hopes to complete in the coming weeks.

Rockville, Md.-based Rexahn Pharmaceuticals, Inc. was another company in the sector with a private placement announcement Thursday.

The biopharmaceutical company raised $8.35 million through the sale of 4,175,000 shares at $2 each. The company also sheared up a $1.3 million zero-coupon convertible note offering. Those notes mature on Aug. 8, 2008 and are convertible into common shares, after Sept. 19, at $2 each.

Proceeds will be used for clinical trials and general corporate purposes.

Meanwhile, oil prices continued to reach new highs, but one market source in Canada said the rising oil prices have had yawn-worthy responses from the energy sector in general.

"Not too much is coming out," he noted. "What we are seeing, as I've mentioned before, is project-specific deals where there's a certain acquisition or a certain project they're associating the deal with."

Oil jumped $0.90 to end at $65.80 Thursday.

Global Alumina's $200 million stock deal

Another impressive offering to hit headlines Thursday was a $200 million stock offering Global Alumina is sealing with Dubai Aluminium Co. Ltd.

The stock deal has a few strings attached to it, however.

Dubai has already purchased 10 million shares at $2 each, but to receive the remaining $180 million, Global Alumina must raise about $700 million from equity offerings. That $700 million includes the $200 million the company has already secured from Dubai and the $138 million the company had previously raised. To fund the remainder, a convertible financing may be in the works, though no details on that have been determined yet.

If Global Alumina raises less or more than $700 million, Dubai's stock purchase will be reduced or increased, respectively, by 25%.

The offering, announced Thursday morning, pushed the company's stock up by 10% as it gained $0.145 to end at $1.595.

"It is quite fitting that Dubai Aluminium becomes Global Alumina's first strategic equity partner," said Bruce Wrobel, Global Alumina's chief executive officer, in a statement. "Dubai, armed with an intelligent business plan, competitive energy resources and a talented management team, went from a concept to completion of one of the largest and lowest-cost aluminium smelters in the world in a relatively short period of time.

"We look forward to tapping into that wealth of experience as Global Alumina, similarly armed with an intelligent business plan, competitive bauxite resources and a talented management team transforms our own concept into one of the largest and lowest-cost green-field alumina refineries in the world.

"Dubai's financial commitment, as well as Dubai's intent to purchase a substantial percentage of our alumina production for a minimum period of 20 years, moves Global Alumina one major step closer to meeting our financial and commercial objectives for this year."

Global Alumina plans to use the proceeds from the financing to build and develop an aluminum refinery in Boke, Guinea. The project is scheduled for completion in 2009.

Toronto-based Global Alumina is a bauxite exploration company focused on aluminum production.

PharmaGap's offerings

As previously mentioned, Ottawa's PharmaGap Inc. announced its plans Thursday to head to the private placement market with two offerings.

The first is a stock deal for up to C$2 million in units. The units will include one share and one warrant, but the pricing details have not been determined.

The other, which is scheduled to close Aug. 31, incorporates the sale of a C$1.5 million convertible secured promissory demand note with SC Stormont Holdings Inc.

The note is payable on demand and convertible into units at C$0.30 each. The units include one share and one warrant. The warrants are exercisable at C$0.45 each for two years.

Proceeds from the note will be used to repay an interim loan made by Stormont for C$500,000. The remainder will be used for general corporate purposes.

PharmaGap presently has 19.4 million outstanding common shares and 22.9 million shares on a fully diluted basis.

"The proceeds from the Stormont note will fund the company's full program through January 2006, and full subscription of the additional C$2 million equity unit placement would extend that funding into the fourth quarter of 2006," said PharmaGap's TK, TK McInnis, in a statement.

"We feel very confident that during this period of stable funding, licensing agreements will be in place to provide significant revenue from both our peripheral technologies and from initial applications of our lead cancer drug compound, PhG-alpha-1."

PharmaGap is a biotechnology company focused on treatments for cancer. The company's stock remained unchanged at C$0.30 Thursday.

Valkyries' stock wraps up

Valkyries Petroleum Corp. saw its stock continue to rise, a day after pricing and then upsizing a private placement for C$66 million.

On Thursday, the company's stock gained C$0.34 to end at C$6.85.

When the offering was announced Wednesday afternoon, the company's stock gained C$0.16 to close at C$6.51.

The Vancouver, B.C.-based oil exploration company plans to sell shares at C$6 each on a non-brokered basis.

The increase, one market source said, is partly due to the offering and partly due to a general increase in oil prices over the past week.

"I'd say it's about equal," he said of the impact of both factors.

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