TimberWest eyes C$100 million; Huntsman settles suits; Discovery Labs adds line

By Kenneth Lim

Boston, Dec. 15 - TimberWest Forest Corp. placed C$100 million of convertibles with an investment firm to reduce its debt.

Huntsman Corp. will take in $250 million from a sale of convertible notes to Apollo Global Management, LLC as part of the resolution of a failed merger with Hexion Specialty Chemicals, Inc.

Discovery Laboratories, Inc. negotiated a $25 million equity financing facility for the next two years to give it financial flexibility as it awaits approval for a drug.

First Bank completed its recapitalization, raising $19 million through a private placement of stock and warrant units.

TimberWest raises $100 million

TimberWest Forest will place C$100 million of 9% convertible debentures due Feb. 27, 2009 with British Columbia Investment Management Corp. to reduce debt.

The maturity of the convertibles may be extended to as late as five years from the settlement date.

They will be initially convertible into stapled units at C$3.50 per unit. TimberWest units closed at C$3.30 on Monday, lower by 26.17% or C$1.17. The company has a market capitalization of C$256.6 million.

The company is also planning a rights offering to holders of existing stapled units to buy up to an additional C$50 million of the convertibles. Every 155.53088 units held will have an entitlement to C$100 of debentures. British Columbia Investment will buy up any of the convertibles that are not subscribed for under the rights offering.

Proceeds will be used to reduce existing bank debt and for general corporate purposes.

Vancouver, B.C.-based TimberWest is a land management company.

"TimberWest continues to experience very weak business conditions and this refinancing will allow the company to overcome current challenges and provide sufficient flexibility to execute its business plan through the current downturn," TimberWest president and chief executive Paul McElligott said in a press release.

Huntsman to raise $250 million

Huntsman sold $250 million of 10-year 7% convertible senior notes to Apollo Global Management as part of a resolution of a failed merger with Hexion Specialty Chemicals.

The notes are initially convertible at $7.86 per Huntsman share. Huntsman common stock (NYSE: HUN) closed at $2.98 on Monday, down by 49.06% or $2.87. The company's market capitalization was $698.6 million.

Huntsman is a Salt Lake City manufacturer of differentiated chemicals and pigments.

Huntsman declared a rocky privatization offer by Hexion as over on Sunday, and said it had come to a settlement with Hexion and Apollo, the private equity firm that owns Hexion. The settlement includes a $325 million break-up fee and $425 million in cash payments by affiliates of Apollo. The total settlement, including the convertible placement, is worth $1 billion.

The settlement resolves claims by Huntsman against Hexion and Apollo, but suits against Credit Suisse and Deutsche Bank, which had initially been expected to fund the merger, are ongoing.

"We are pleased to have reached this agreement with Hexion and Apollo," Huntsman president and chief executive Peter R. Huntsman said in a statement. "Receipt of these proceeds will enhance the strength of Huntsman's balance sheet and better position our company to prosper during the current turbulence in the global economy. Additionally, our associates, customers and suppliers can now put the uncertainty concerning the outcome of the merger with Hexion behind them."

Apollo chairman Leon Black added: "We are happy to be resolving this situation in the best interest of our investors. It puts to an end the six month disagreement and distraction between our companies. As the majority stakeholder in Hexion and now an investor in Huntsman, we look forward to both companies traversing this economic cycle and prospering."

Discovery Labs takes $25 million line

Discovery Laboratories secured a $25 million committed equity financing facility agreement with Kingsbridge Capital Ltd.

The company also negotiated a three-year, $60 million equity financing facility with Kingsbridge in May.

Under the new agreement, Kingsbridge is committed to purchase up to 15 million common shares for $25 million over two years.

Discovery may access capital in tranches up to the lesser of $3 million and 1.5% of its market capitalization at the time of the draw down, subject to certain conditions.

The shares will be priced at discounts ranging from 6% to 15% of applicable average market levels, subject to a minimum of $0.60 per share.

Discovery common stock (Nasdaq: DSCO) slid 6.61% or $0.08 to close at $1.13 on Monday. Discovery has a market capitalization of $112.5 million.

Kingsbridge also received a warrant for 675,000 common shares, which is exercisable at $1.5132 per share for five years.

Based in Warrington, Pa., Discovery develops treatments for respiratory diseases in children, adults and premature infants. Approval by the U.S. Food and Drug Administration for the company's Surfaxin respiratory drug has been delayed, and a decision is not expected until April 2009 at the earliest.

"We intend to use this new CEFF judiciously to manage our financial position as we wait for the FDA's April 2009 potential approval of Surfaxin for the prevention of Respiratory Distress Syndrome in premature infants," said Discovery executive vice president and chief financial officer John G. Cooper in a statement. "The New CEFF also provides us with flexibility to manage Discovery Labs' financial position during the difficult economic environment that currently plagues the financial markets. Our ability to choose the timing and amount of financings under all of our CEFF arrangements may potentially permit us to minimize dilution for our shareholders."

First Bank recapitalizes

First Bank raised $19 million through a private placement of units as part of its recapitalization.

The company sold units of one common share and one quarter-share warrant at $7.90 apiece. Each whole warrant is exercisable at $9.00 for five years.

First Bank common stock (OTCBB: FRBA) closed unchanged at $4.40 on Friday.

A group of central New Jersey bank investors led by Leslie E. Goodman and Patrick L. Ryan took part in the offering.

First Bank is based in Ewing, N.J.

The placement was part of First Bank's recapitalization plan. The company has also increased the size of its board to 11 from nine, and expects to open its first Mercer County branch in Ewing, N.J., in late 2008 or early 2009.

"The recapitalized First Bank has over $25 million in equity capital and a clean balance sheet,

Goodman, the new chairman, said in a press release. "We are in an excellent position to take advantage of the customer dislocation taking place in the market right now. As banks continue to shrink or get acquired, we will be direct beneficiaries. In addition to the capital, we have the team and the expertise to navigate these rocky waters. Our management and board, collectively, have over 200 years of banking experience."

Ryan, the new executive vice president and chief operating officer, added: "We are investing and building a platform for growth. This market requires thoughtfulness and prudence - we understand that and we will act accordingly. Banking is a marathon, not a sprint; the investments we make and the relationships we build over the next couple of years will create the foundation for a great, super-community bank for years to come."

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