Private placement volume holds steady; Arawak Energy plans C$58.8 million deal

By Sheri Kasprzak

Atlanta, Feb. 28 - Despite a sagging stock market, the private placement market remained somewhat active Monday.

"It hasn't been bad today," said one sell-sider of volume. "Of course, it hasn't been great either. It's somewhere in the middle. Mostly smaller deals. Not so bad, considering stocks were pretty rotten today."

The Dow Jones Industrial Average closed down 75.37 Monday at 10,766.23; the Nasdaq composite index ended the day down 2,051.72 and the S&P 500 lost 7.77 to close at 1,203.60.

Oil prices made slight gains Monday, edging up $0.01 to $51.50 per barrel.

"I don't think oil prices really made that much of an impact [on issuance] today," said one Canadian sell-side source. "There really wasn't that much of a change in price and I think energy companies that are ready to get into the market know that the conditions are good for it already."

A few oil companies announced deals Monday, with Arawak Energy Corp. leading in size with a C$58.8 million offering. Maxim Resources Inc. also announced a C$1.16 million deal.

The Arawak Energy deal was both announced and upsized Monday. It was originally announced as a C$50.4 million offering.

The new deal includes 28 million shares at C$2.10 each.

The offering is being placed through a syndicate of underwriters co-led by Peters & Co. Ltd. and Orion Securities Inc.

"It looks a bit off to me," said one market source who had seen the deal. "For any other sector, it looks okay, but for oil, I'd expect a smaller discount since energy stocks have been having a good run. I don't have a lot of details on this company, so I can't really tell you [why]."

The deal is priced at a 12% discount to Arawak's closing price of C$2.38 on Feb. 25.

Based in Anguilla, British West Indies, Arawak is an oil and natural gas acquisition and development company. It plans to use the proceeds for its 2005 and 2006 exploration and development program and for potential acquisitions. Until those expenses are incurred, the proceeds may be used to reduce debt.

The company's stock closed down C$0.06 at C$2.32 on Monday.

Lucid wraps $6 million deal

Lucid Entertainment Inc. raised US$6 million in a private placement of a secured convertible note.

The note bears interest at Prime plus 200 basis points, matures in three years and is convertible into common shares at C$0.715 each.

The investor also received warrants for 8.4 million shares at C$0.593 each for two years and additional investment rights for 2,656,726 shares at US$0.01 each, exercisable for 20 years.

"We are obviously delighted to have completed this important financing," said Lucid's chairman and chief executive officer Michael Wilkings in a statement. "An international company such as ours, operating in the mixed-use indoor entertainment sector, needs to explore financial markets beyond Toronto, and may be more naturally suited to the investment climate of New York or London. We see this as a first step in expanding and strengthening our financial and other relationships in the United State and the U.K., where much of our long-term growth will occur."

Lucid, based in Toronto, operates and develops entertainment hospitality venues.

The company's stock closed down C$0.005 at C$0.46 on Monday.

Formation raises C$10 million

Formation Capital Corp. received C$10 million from a private placement of units.

The offering included a total of 25 million units at C$0.40 each. The units were comprised of one share and one half-share warrant.

The whole warrants provide for an additional share at C$0.60 each for two years.

The offering was first announced Jan. 26 as an C$8 million deal with a greenshoe option for up to 4,444,444 units. The greenshoe was fully exercised and the deal was oversubscribed.

"I thought the pricing of this deal was too low when it was first priced and then they dropped the price," said one market source. "The deal was over-subscribed because it was priced so low. The warrants look okay, so maybe they'll do okay with those."

Jennings Capital Inc. and Raymond James Ltd. were the placement agents.

Based in Vancouver, B.C., Formation is a mineral development, exploration and refinement company. It plans to use the proceeds from the offering for its Idaho Cobalt project and for working capital.

On Monday, Formation's stock closed down C$0.03 at C$0.63.

First Union REIT loses ground

After announcing a $90,998,000 private placement Feb. 25, First Union Real Estate Equity and Mortgage Investments' stock dipped Monday.

The company closed down $0.06 to end at $4.28 Monday.

First Union gained $0.11 on Feb. 25 after announcing the offering, to close at $4.34.

"They just settled a lawsuit, in their favor," said one market source. "I would think that might have more to do with the slight dip in their stock."

The private placement includes shares of B-1 cumulative convertible preferreds with a conversion price of $4.50 each.

Boston-based First Union Real Estate Equity and Mortgage Investments is a real estate investment trust.

Plains All American drops

Plains All American Pipeline L.P.'s stock slipped Monday after wrapping up a private placement for $21,924,750 on Feb. 25.

The company's stock ended the day down $0.37 at $39.14 after gaining $0.29 to close at $39.51 Feb. 25.

The company sold units at $38.13 each

Based in Houston, Plains All American is in the business of oil transporting, gathering, marketing and storing.

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