PIPE issuance drops off; NCT Group restates $50 million credit line

By Sheri Kasprzak

New York, July 14 - After a week of steady private placement issuance, volume trailed off Thursday as news of potential hurricane damage abounded but oil prices headed downward for a second session.

"We're certainly giving these storms some time to blow through to see what the impact on stocks will be," said one sell-sider Thursday. "I would think most issuers would probably wait in conditions like this."

"Conditions like this" included only meager gains among the major stock indexes and a significant plunge for oil prices.

The Dow Jones Industrial Average gained only 71.50 to end at 10,628.69; the Nasdaq composite index edged up 8.71 to close at 2,152.82 and the S&P 500 closed up 3.21 at 1,226.50.

Oil prices dipped $2.21 to close at $57.80 per barrel after news spread that Hurricane Emily may not directly impact oil-producing areas of the Gulf Coast.

Energy companies remained out of the private placement market Thursday, a sell-sider in Canada said, bringing issuance there almost to a halt.

"It's not just oil, though," said the Canadian market source. "We're finding other sectors are just as affected. Oil is the major one, and that's certainly kept energy issuers out for the time being, but other sectors, like some minerals, are brought down too."

Gold, which had been making significant gains, fell on Thursday to its lowest level in quite some time, according to the Canadian sell-sider, so those companies were pushed out of the market as well.

NCT's $50 million equity line

Moving back to the United States, NCT Group, Inc. led private placement news with word that it has refinanced an equity line of credit from Crammer Road LLC for up to $50 million.

Under the terms of the restated agreement, NCT will sell up to $50 million - and at least $5 million - in shares to Crammer Road at a 7% discount to the lowest closing bid price for NCT's stock in any three of 10 trading days immediately before a put.

The equity line replaces an equity credit agreement NCT received from Crammer on Sept. 30, 2004, for $50 million. That credit facility from September replaced yet another $50 million credit facility from July 25, 2002.

Cy Hammond, NCT's chief financial officer, said the company did not use the first two credit facilities it received from Crammer Road, but the company intends to use this amended facility for general corporate purposes.

"They [Crammer Road] offered more favorable terms," Hammond said in an interview Thursday. "We received a more favorable discount and they reduced the minimum borrowing terms from 150% to 100%."

Under the initial terms of the credit agreement, NCT agreed to sell the shares at a 9% discount to the lowest closing bid price for its stock in any three of 10 trading days immediately before a put. The company had also been obligated to register shares for at least 150% of the minimum commitment.

The original equity line was the first time NCT has conducted a private equity agreement, Hammond said, but the company's relationship with Crammer Road is not new.

"We do have a long-term relationship with the fund manager and the fund itself that has been in place since 1997," he said.

NCT reported in a form 10-K from the Securities and Exchange Committee that it had 641,970,392 common shares outstanding as of May 16.

According to the company's latest earnings statement, its net losses have accumulated and the company is in danger of failing to meet its short- and long-term operating and capital requirements.

The company's operating losses, since inception, amount to $371.4 million through March 31. As of March 31, the company had a working capital deficit of $77.2 million and was in default on $500,000 in notes and $5.1 million in convertible notes.

Based in Westport, Conn., NCT develops products to reduce noise for companies in the media and entertainment industries.

NCT's stock remained unchanged at $0.012 Thursday.

Maxwell plans $5.5 million direct offering

Moving away from private placements, San Diego-based Maxwell Technologies, Inc. announced its plans to raise $5,499,990 in a direct placement.

The power backup and energy supply technology company said it intends to sell 488,888 shares at $11.25 each.

The shares are being sold under the company's shelf registration.

The company's stock lost $0.15 to close at $12 on Thursday.

SouthernEra's C$5 million offering

North of the border, SouthernEra Diamonds Inc. led the meager private placement offerings with word that it plans to raise C$4,992,000 in an offering of flow-through shares and units.

The Toronto-based diamond exploration company plans to sell 6.8 million flow-through shares at C$0.44 each and 5 million units at C$0.40 each.

The units include one share and one half-share warrant. The whole warrants provide for the purchase of an additional share at C$0.65 each for two years.

Haywood Securities Inc. is the placement agent for the deal and has an over-allotment option for up to C$2 million in any combination of flow-through shares or units.

The proceeds from the flow-through shares will be used for the company's diamond exploration projects. The proceeds from the units will be used for exploration and development projects and for general corporate purposes.

The offering was announced late Wednesday and the company's stock gained C$0.03 to close at C$0.42 Thursday.

"There's a diamond shortage now and so prices are up," said one market source. "As for this [deal], it looks pretty good to me. I'd say right in line."

As to the gain in the stock, the market source said he couldn't be sure if the offering pushed up the stock or if general gains in diamond prices were the cause.

Do higher diamond prices mean a potential trend of more issuance among diamond exploration companies?

This market source said there may be some increase in the number of diamond issuers, but "I don't foresee a trend."

Arena Resources' stock slips

A day after closing a $10 million PIPE offering, Arena Resources Inc.'s shares dropped for the second straight session.

The company's stock lost $0.35 to end at $12.45 Thursday.

After the offering was closed Wednesday, Arena's stock dipped $0.20 to close at $12.80.

Arena, a Tulsa-based oil and natural gas exploration company, sold shares at $10.30 each.

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