Private placement volume maintains on modest stock gains; Genitope raises $60.5 million

By Sheri Kasprzak

Atlanta, Dec. 15 - Private placement volume remained moderate Wednesday as stocks made slight gains and as oil prices took another leap.

"Volume wasn't half bad today," said one sell-side source. "We're seeing some decent-sized deals in the market these days. Stock prices are helping.

"I think earlier this year, some companies may have been afraid to get their deals in the market because they were waiting for better stocks.

"Well, now we have better stocks so the market is a bit more appealing. Not sure how long that will last, but for now, volume is reasonably good."

On Wednesday, the Dow Jones Industrial Average was up 15 to end at 10,691.45, the Nasdaq composite gained 2.71 to close at 2,162.55 and the S&P 500 closed up 2.34 at 1,205.72.

Oil prices soared $2.37 to close at $44.19 per barrel.

In Canada, a stronger resources market helped volume.

"Gold is strong now," said one Canadian sell-sider. "Resources in general are doing pretty good."

Alto Ventures Ltd., a gold exploration company, announced it plans to raise C$2 million in a private placement and Grandview Gold Inc., another gold company, also announced its plans to enter the market with a C$1.1 million offering.

Heading up private placement action in the United States, Genitope Corp. raised an additional $3,562,500 in its previously announced private placement of shares for total proceeds of $60,562,500.

The company sold 4 million shares on Tuesday at $14.25 each and sold an additional 250,000 shares Wednesday at $14.25 each.

W.R. Hambrecht & Co. LLC was the placement agent in the offering.

Redwood City, Calif.-based Genitope is a biotechnology company. It plans to use the proceeds to fund costs related to leasing and build out, and qualification of a commercial-scale manufacturing facility. The proceeds will also fund expenses related to manufacturing and potential commercialization, and to establish sales and marketing capabilities, as well as for general corporate purposes.

On Wednesday, the company's stock plummeted $0.37 to close at $14.83.

NRG upsized, goes to 105

With heavy books and buyers "frothing at the bit," as one salesman put it, NRG Energy Inc. upsized its private placement convertible to $420 million from $400 million and still printed the perpetual convertible preferreds with aggressive terms relative to pre-market guidance, which had even been tightened once before pricing.

Still, after breaking to trade, the paper went north of 103.5 - where it was last seen in the gray market before pricing. Citigroup Global Markets Inc., an equal placement agent on the deal with Deutsche Bank Securities, took the new issue out Wednesday at 105.

The issue was sold at par of $1,000 with a 4.0% dividend and 24.5% initial conversion premium - at the tighter end of revised guidance for 4.0% to 4.25%, up 23.5% to 25%, which had been squeezed from original price talk for 4.0% to 4.5%, up 22% to 25%.

Analysts from sellside and buyside were pegging the new NRG private placement anywhere form 1.7% expensive to 2.5% cheap, roughly at the middle of the original price talk.

"It was not a bad set-up, relative to what's out there - low vol, decent cash flow return, but I did it small," said one hedge fund trader.

NRG terms attracted buyers

NRG's history aside, players said the convert's popularity was dictated mostly by the terms. Even though it priced aggressively in relation to indicative terms - both original and amended - they were more generous than most buyers have seen on recent new convertible issues, even amid a rising interest rate environment.

"First of all, it's a pretty healthy company coming out of bankruptcy, seems to be fiscally sound," said a hedge fund convertible portfolio manager. His fund's convert trader said they bought the NRG preferred and "legged into" the common stock and then sold some "expensive" $35 calls "to cement the hedge."

NRG stock soared on the heels of the convert placement, gaining $2.19 on the day, or 6.82%, to close Wednesday at $34.31.

There were lots of players getting involved in the NRG convert on an outright basis, though.

"We like it outright, too. The stock has had a tremendous run," said another hedge fund manager. "It has a nice yield with a modest premium. I mean when have we seen a 24.5% premium? It's kind of like back to the future."

NRG story looking up

Sources who got involved in the new NRG convert liked its plans to buy back stock and the debt retirement as well - both moves that will help its outlook.

"Yes, we were involved," one buyer said, adding, "Almost any story that is a retirement of 8% debt does well."

Minneapolis-based NRG, a power generation firm, has earmarked proceeds to redeem a portion of its 8% senior secured second lien notes due 2013. That, in turn, will allow the company to use existing cash balances to repurchase 13 million shares of stock held by investment partnerships managed by MatlinPatterson Global Advisors LLC at a discount. After the stock buyback, MatlinPatterson's stake in NRG will be reduced to a point where it will no longer have a position on the NRG board of directors.

On exiting bankruptcy in December 2003, NRG issued the $1.25 billion of 8% senior secured second lien notes due 2013 (B2/B+) and in January 2004 a $503.5 million proceeds add-on was sold.

NRG tightens bank facility too

NRG squeezed the terms on its credit facility, too - by 25 to 62.5 basis points - amid the enthusiasm for the convert exhibited Wednesday and excitement over the new bank paper, which has already been established going into the convertible marketing period.

The $950 million credit facility (Ba3/BB), via joint lead arrangers Credit Suisse First Boston and Goldman Sachs, was structured as a $450 million seven-year term B, a $350 million seven-year synthetic letter-of-credit facility and a $150 million three-year revolver.

On Wednesday the term loan was talked at Libor plus 187.5 bps, with six months of soft call protection at a call price of 101; it had been talked at Libor plus 250 bps. The revolver was tightened to Libor plus 250 bps, from Libor plus 275 bps.

Proceeds from the new credit facility are earmarked to refinance bank debt.

Sources in the bank loan market had said earlier this week that the new facility was already oversubscribed by Dec. 3, almost a week before the actual commitment deadline, with over $1.6 billion of commitments in the book, so it was expected to be a blow out.

American Technology gets $25 million

In other private placement news, American Technology Corp. received $25 million in a committed equity financing facility with Kingsbridge Capital Ltd.

Kingsbridge will provide the line for two years. American Technology may draw upon the facility at the lesser of 3% of the company's market capitalization or $10 million.

The purchase installments will be priced during 15-day periods with the company controlling the minimum acceptable purchase price for shares issued to Kingsbridge. The price of the shares has a floor of $3.

Kingsbridge will buy shares at discounts from 8% to 12% of the volume weighted average market price during the two-year financing period, with the reduced discount applying if the price of the stock is greater than $10.

Kingsbridge also received warrants for an additional 275,000 shares at $8.60 each for five years.

"This financing structure provides us substantial flexibility in financing our increasing business," said the company's chief financial officer Michael Russell in a statement. "When compared to other financing options, we believe the [committed equity financing facility] not only offers superior terms and conditions, but also gives us the latitude we need to enable our anticipated rapid growth."

Based in San Diego, American Technology develops, manufactures and distributes proprietary sound technologies and products.

American Technology's stock soared $0.88 to close at $7.50 Wednesday.

Hythiam wraps offering

Hythiam Inc. finished a private placement for $22.5 million through the sale of 5 million shares at $4.50 each.

"The deal is definitely priced in line with the market," said one market source who had seen the deal. "Their stock has been trading higher than usual over the past few days, but it is priced right within range."

In December, the company's stock has ranged between $5.20 and $4.35.

On Wednesday, the company's stock closed unchanged at $5.07.

"We will enter the new year strongly capitalized with over $27 million in cash on our balance sheet," said Hythiam's chief executive officer Terren Peizer in a statement. "This should allow us to greatly expand our footprint of licensed treatment facilities both in the U.S. and internationally, as well as significantly increase the number of patients who will benefit from the Hands protocols."

Based in Los Angeles, Hythiam researches, develops, licenses and commercializes physiological protocols to treat alcoholism and other addictions. The proceeds from the offering will be used for general corporate purposes, market expansion and working capital.

Cortex raises $11.26 million

Cortex Pharmaceuticals Inc. raised $11.26 million in a private placement.

New and existing investors bought 4,233,333 shares at $2.66 each. The investors also received warrants for an additional 2,116,666 shares at $3 each for five years.

Rodman & Renshaw LLC was the placement agent in the deal.

"With this financing, Cortex, for the first time in its history, has the kind of financial resources that will allow us to accelerate the development of CX717 and a follow-on compound from the low-impact chemistry group," said Roger Stoll, the company's chairman and chief executive officer, in a statement.

Based in Irvine, Calif., Cortex develops drug therapies for neurological and psychiatric disorders.

The company plans to use the proceeds from the financing to accelerate the development of some of its products.

On Wednesday, the company's stock closed down $0.29 at $2.71.

iCad closes $5.25 million deal

iCad Inc. finished up a $5.25 million in a private placement when it sold 1,166,666 shares at $4.50 each.

Investors also received warrants to buy a total of 583,333 shares at $5.50 each for five years.

"This financing will allow us to reduce our credit line borrowings, reduce interest expenses and enhance the liquidity of iCad's balance sheet," said W. Scott Par, the company's chief executive officer and president, in a statement. "Any dilution associated with the financing will be largely offset by the reduction in potential dilution associated with the paydown of our convertible line of credit."

Nashua, N.H.-based in Nashua, N.H. iCad designs, develops and markets computer aided detection imaging technology and systems for breast cancer detection and other applications. It plans to use the proceeds to reduce borrowings on a line of credit with the company's chairman and to reduce accrued interest and related obligations.

The company's stock closed down $0.055 at $4.90 on Wednesday.

Mace raises $4.41 million

Mace Security International Inc. closed a private placement for $4,410,000.

The company issued 1 million shares at $4.41 each.

The investors in the deal will receive warrants to buy a total of 200,000 shares at $5.88 each.

Mount Laurel, N.J.-based Mace manufactures electronic surveillance and personal defense products and also operates car wash facilities. The company plans to use the proceeds from the deal to develop its electronic surveillance products and personal defense divisions, future growth strategies and general working capital.

The company's stock closed up $0.06 at $5.02.

Derma plans $1.5 million offering

Derma Sciences Inc. plans to raise up to $1.5 million in a private placement.

The offering includes up to 3 million units at $0.50 each. The units consist of one share and one warrant.

The warrants allow for an additional share at $1.05 each for four years.

The deal is scheduled to close Dec. 31.

Based in Princeton, N.J., Derma Sciences manufactures sprays, ointments and dressings for chronic wounds.

Derma's stock closed unchanged at $0.60 on Wednesday.

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