BearingPoint downsizes offering to $200 million; stocks push volume down

By Sheri Kasprzak and Ronda Fears

Atlanta, April 22 - BearingPoint Inc. led private placement news again Friday with word that it has downsized its previously announced $250 million private placement to $200 million.

The firm, formerly known as KPMG Consulting Inc., sold $200 million of 20-year convertible debentures in the private placement market with a 5% handle and 25% initial conversion premium - wide of the indicative range for a 4.25% to 4.75% coupon and at the cheap end of premium guidance for 25% to 30%.

The Section 4(2) deal was trading under Rule 144A.

The downsized issue was launched into the market alongside news of missing financial filing deadlines, violations in bank covenants and concerns about cash flow shortfalls as well as credit downgrades. But the issue was priced at par, market sources said, after the company boosted the coupon 25 to 75 basis points.

Right out of the box the issue was seen at 100.25 bid by a buy-side trader, but at the close a sell-side market source said it had gained to 100.5 bid.

BearingPoint shares also rebounded from the 32% slide on Thursday's news, closing up 50 cents, or 9.5%, on Friday at $5.78.

The BearingPoint 2.5% and 2.75% convertibles also rebounded to the low 70s from the mid-60s on Thursday, after trading in the mid-90s earlier in the week, sell-side traders said. The company sold those issues in mid-December, and replaced its then-current credit facility with a new $400 million senior revolving credit facility, plus redeemed its $220 million of senior notes and a $135 million previous revolving credit facility.

BearingPoint credit firmed up

Market sources said the attitude toward BearingPoint improved for three reasons. First, the deal was said to be fully placed, rather than sitting on the placement agents' desks, even at a smaller amount. Second, it was not re-offered below par. Lastly, Standard & Poor's lifted its view on the credit as a result of the liquidity injection.

McLean, Va.-based BearingPoint earmarked proceeds to cash collateralize or replace letters of credit under its existing credit facility, support letters of credit or surety bonds in respect to its state and local business, pay related expenses of the offering and for general corporate purposes.

S&P revised its watch for BearingPoint to developing from negative, reflecting the additional near-term liquidity provided by the new convertible even at the downsized amount.

News that BearingPoint would miss the extended deadline to file its 2004 10-K annual report at the SEC and a warning about potential funding shortfalls in addition to negative cash flow projections, which triggered violations in its bank covenants, had sparked credit downgrades as well as several downgrades to the stock on Thursday.

Moody's cut BearingPoint's existing convertibles to B3 and S&P cut the converts to B-.

Low stocks deter issuers

Elsewhere in the private placement market, sell-siders said depressed stocks put issuers on edge and caused them to avoid the market.

"It's partly because of stocks today and partly just because it's a Friday," said one U.S.-based sell-side source.

"Yesterday's stocks seemed to point to more issuance today, but I think once potential issuers saw the stock market today, they decided to hold off. That's coupled with the fact that there are, most of the time, fewer deals out there at the end of the week."

The Dow Jones Industrial Average lost 60.89 to close at 10,157.71, the Nasdaq composite index closed down 30.22 at 1,932.19 and the S&P 500 ended the day off 7.83 to close at 1,152.12.

"I think it's a safe assumption that issuers were none too thrilled with the stock market today," said another sell-sider. "The only thing we can really do is sit back and see what the market will do early next week. And that's exactly what issuers are doing."

Solexa's $32.5 million private placement

Solexa, Inc. announced its plans to head to the private placement market with a $32.5 million offering.

The deal includes 8,125,000 shares sold at $4 each to a group of institutional investors in the health-care sector, led by ValueAct Capital Partners LP.

The investors also received warrants for 4.1 million shares, exercisable at $5 each.

SG Cowen & Co. LLC is the placement agent in the offering.

After the deal was announced Friday morning, the company's stock dropped $0.30, or 4.11%, to close at $6.88.

Based in Hayward, Calif., Solexa develops a platform for genetic analysis. The company intends to use the proceeds to develop and launch its first-generation sequencing-by-synthesis molecular array platform for genetic analysis. Some of the proceeds will also be used to repay a loan to Silicon Valley Bank.

Eastern Platinum raises C$34.08 million

Eastern Platinum Ltd. wrapped up a private placement with a partially exercised greenshoe for C$34,083,162.

The company sold 22,722,108 subscription receipts at C$1.50 each. A total of 2,722,108 shares were sold under a partially exercised greenshoe.

Every four receipts are exchangeable for one unit upon the completion of the amalgamation of Elgin Resources Inc. and Jonpol Explorations Ltd. into Eastern Platinum. The units include one share and one half-share warrant. The full warrants allow for an additional share at C$2 each for three years.

A syndicate of underwriters co-led by GMP Securities Ltd. and Canaccord Capital Corp. had originally been granted an over-allotment option for up to 3,333,333 additional receipts.

"Eastplats is committed to building a portfolio of near-surface platinum-rich mining projects in South Africa using Spitzkop as a foundation, where the average grade makes it one of the highest-grade undeveloped platinum group metal projects in the country," said Ian Rozier, president of Elgin, in a statement.

"The C$34 million financing and the completion of the merger will enable the company to move ahead rapidly with its objective to become a significant participant in South Africa's platinum group metal sector."

Based in Vancouver, B.C., Eastern Platinum is a platinum exploration company. It plans to use the proceeds from the deal for mining and exploration in South Africa.

On Friday, Jonpol's stock dropped C$0.01 to close at C$0.33 and Elgin's stock closed down C$0.05 at C$1.35.

ComnetiX prices C$4.75 million offering

ComnetiX Inc. priced a C$4.75 million private placement of units Friday in a deal including "very appealing" warrants, according to one sell-sider.

The company plans to sell 1.9 million units at C$2.50 each.

The units include one share and one half-share warrant, the whole of which are exercisable at C$3.25 each for one year.

"The pricing looks fair, but the warrants are really an interesting part of the deal," said one market source. "The warrants are very appealing and will be very good for them."

Wellington West Capital Markets Inc. and McFarlane Gordon Inc. are the lead placement agents in the deal.

Based in Toronto, ComnetiX provides biometric identification technologies to public and private entities. The company intends to use the proceeds from the deal to fund growth. The remainder will be used for working capital and general corporate purposes.

ComnetiX's stock edged up C$0.01 Friday to close at C$2.42.

Genaissance wraps $4.5 million deal

Genaissance Pharmaceuticals, Inc. closed a private placement for $4.5 million in a loan sold to Xmark Funds, the company said Friday.

The loan matures April 21, 2007, and bears interest at 5% annually.

Xmark also received warrants for 2 million shares, exercisable at $2.25 each.

The company plans to use $2.5 million of the proceeds from the deal to repay a term loan from Comerica Bank.

"This funding enhances our cash flow and overall liquidity, as there are no longer scheduled principal payments or minimum cash balance requirements," said the company's president and chief executive officer Kevin Rakin in a statement. "We are pleased that Xmark has provided this funding and appreciate their confidence in our business."

Based in New Haven, Conn., Genaissance is a drug discovery and marketing company. The remainder of the proceeds will be used for working capital.

The company's stock closed down $0.03 at $1.21 Friday.

Churchill's stock remains unchanged

A day after pricing a private placement for C$10,646,000, Churchill Corp.'s stock didn't budge after suffering losses on Thursday.

After the deal was announced Thursday morning, the company's stock lost C$0.08 to close at C$2.40. The company's stock didn't move from C$2.40 Friday.

"I think it's just proof that the deal was under-priced," said one market source familiar with the offering. "That their stock hasn't moved one way or the other says to me that the reason the company's stock went down yesterday [Thursday] was because the discount was too high."

The company plans to sell shares at C$2 each to Matco Capital Ltd. and Peter Allard.

Based in Edmonton, Alta., Churchill provides building construction, industrial construction and maintenance services in western Canada.

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