Private placement volume moderate as oil weakens; Wet Seal releases details on $40 million notes

By Sheri Kasprzak

Atlanta, Nov. 9 - Private placement volume was moderate Tuesday, with slightly weaker Canadian volume on word of falling oil prices.

"Canadian volume is being affected by the oil prices," said one Canadian sell-sider. "We have seen a few smaller deals today, but I do think the oil slump is keeping some companies away from the market at least for now."

Oil prices closed at $47.37 Tuesday after dropping about $1.72 on the session.

Five Canadian companies said they were jumping into the private placement market Tuesday, with the largest deal at C$48 million.

Topping private placement news in the United States Tuesday were long-awaited details on The Wet Seal Inc.'s $40 million convertible notes.

The deal was originally announced, with few details, Nov. 3.

The seven-year notes will be sold to buyers led by S.A.C. Capital LLC and are convertible into class A common shares at $1.50.

The deal is part of a restructuring within the company as chief executive officer Peter D. Whitford tendered his resignation Nov. 8 and executive vice president Joseph Deckop took the reins temporarily. Director Anne Zehren also resigned Nov. 8.

"This is a tremendous opportunity for Wet Seal, S.A.C. and our shareholders," said Deckop in a statement. "The interim financing and anticipated infusion of capital provides a critical element to our turnaround strategy and growth plans. I am excited about the future and look forward to working with this dynamic and highly respected team."

The Wet Seal is a retail-clothing store based in Foothills Ranch, Calif. On Tuesday, its stock closed down $0.15 at $1.45.

The Sands gambles on private placement

The Sands Regent said Tuesday it plans to sell $9.24 million in a private placement.

Some sell-siders noted that they had never seen a casino company enter the market before.

"Honestly, this is the first time I've ever seen a casino operator in the market," said one source.

"So, yes, it is a little strange. It's definitely not something you see every day. As to why they may have decided to this type of financing, I can't really say. The deal, to me, looks like it's priced pretty much in line with the market though."

Management for The Sands didn't immediately return requests for comments on the deal Tuesday.

The company plans to sell 1.12 million shares at $8.25 each and expects the deal to wrap up within the next several days.

The Sands Regent owns and operates the Sands Regency Casino and Hotel in Reno, Nev.; the Gold Ranch Casino and RV Resort in Verdi, Nev.; and Rail City Casino in Sparks, Nev. The company plans to use the proceeds from the deal to repay outstanding debt and for general working capital.

On Tuesday, Sands' stock plummeted $0.97 to close at $8.90.

Medialink gets $5 million

Medialink Worldwide Inc. has agreements from institutional investors for $5 million in subordinated debentures.

The five-year debentures bear a variable interest rate at the higher of 7% or Libor plus 450 basis points.

The debentures are convertible into stock at a conversion price of $4.05, a premium of 23% over Medialink's closing price on Nov. 8.

Medialink's president, chairman and chief executive officer Laurence Moskowitz said in an interview Tuesday he feels the deal priced well.

"We are very happy with the entire transaction," Moskowitz said.

In a statement released earlier Tuesday, Moskowitz said the financing will help support expanded sales and the company's marketing effort for its Teletrax video asset management unit.

"It's in line," said one trader on the deal's pricing.

Medialink is a New York-based multimedia communication services company. It plans to use the funds from the offering to grow its television tracking and video asset management unit, Teletrax. Medialink will also use the proceeds for working capital and to reduce its bank debt.

The company's stock closed down $0.29 at $3 Tuesday.

Birchcliff tops Canadians

In the largest Canadian deal of the day, Birchcliff Energy Ltd. said it plans to raise C$48 million in a private placement as part of an arm's-length merger.

The company will merge with Scout Capital Corp. to form Amalco.

In the deal, Birchcliff will issue 16 million shares at C$3.

The Birchcliff shares will convert to common shares of Amalco on a one for one basis. Scout's shares will be exchanged for Amalco's at one share of Amalco for every C$3 of net cash at closing. Assuming this figure, shareholders will receive one share of Amalco for every 11.319 shares of Scout.

Managers and directors of Birchcliff will buy about five million shares at C$3 for proceeds of about C$15 million.

Birchcliff's managers will also be granted 3.4 million performance warrants, totaling 20% of the estimated issued shares of Amalco at closing. The warrants have a term of five years and are exercisable at C$3 per share when Amalco's shares trade on a recognized exchange for C$6 per share for 20 consecutive trading days.

Birchcliff is a Calgary, Alta.-based private oil and gas company. Scout is a Calgary-based merchant and investment bank. On Tuesday, Scout's stock closed at C$0.30 Nov. 4, its last trade.

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