BlackRock Kelso wraps $530 million stock offering; PIPE volume remains slow as week ends

By Sheri Kasprzak

New York, July 29 - BlackRock Kelso Capital Corp., a private equity firm based in New York, led sparse private placement news in a big way Friday with word that it completed a $530.4 million stock offering.

The company sold 35.36 million shares at $15.00 each to a group of institutional and accredited investors.

Wachovia Capital Markets, LLC was the placement agent.

Calls to BlackRock chief executive officer James Maher for comment on the deal were not returned by press time Friday.

BlackRock Kelso's parent company, BlackRock Inc., announced on July 19 that its second-quarter earnings grew by 15% over the same period from 2004.

The company reported net income of $53.3 million, up from $48.0 million for the second-quarter of 2004.

BlackRock Kelso provides debt and equity capital to middle-market companies.

Elsewhere, private placement volume continued to stall as stocks dipped and a week filled with second-quarter earnings report releases wrapped up.

"No one's doing anything today," observed one market source of the quiet end to a mostly quiet week. "It's Friday, these guys have just finished putting out earnings. I've seen a few very small things so I can't even tell you what was out there."

The Dow lost 64.64 to end at 10,640.91; the Nasdaq composite index slid 13.61 to close at 2,184.83, and the S&P 500 lost 9.54 to close at 1,234.18.

It may have been slow going in the United States, but one Canadian sell-sider said he expects things to pick up, especially among oil issuers, after Raymond James Ltd. released a very complimentary report on Canadian oil sands.

"I've read some of it," said the Canadian source. "It mentions political stability as a key to investor security and a few other production-related things."

The source said he has no doubt that the report will lead to more PIPE offerings among energy concerns. And investors will eagerly embrace those offerings, he said.

U.S. Gold raises $4 million

U.S. Gold Corp. closed a $4 million private placement with its incoming chief executive officer and now-majority shareholder Robert McEwen.

McEwen bought 11,111,111 shares at $0.36 each.

The closing was announced Friday afternoon, and U.S. Gold's stock remained unmoved at $0.39.

In an interview Friday afternoon, McEwen said it was all about location, location, location when it came to his choice to invest in U.S. Gold.

"They're in the right country for gold, they're in the right state," he said. "Nevada is the third most-prolific producer of gold in the world."

The structure of the offering itself, McEwen said, was appealing to him as both an investor and the company's incoming chief executive officer.

"I was keen to get a large interest in the company," McEwen said. "I liked the real estate they had, but they had very little work. I didn't want to burden them unnecessarily with large amounts of debt. I prefer companies with no or minimal debt."

The proceeds from the offering, McEwen said, will go toward compiling an exploration program.

With McEwen taking the helm of U.S. Gold, four of the company's six directors are resigning and will be replaced by McEwen's own nominees.

"Rob McEwen is one of the noted visionaries and entrepreneurs in the gold-mining sector," William Reid, the current chief executive officer of U.S. Gold, said in a statement released Friday. "As my brother David and I close out our last chapter in the U.S. Gold story, a company we founded 28 years ago, we are very pleased to be turning the next chapter over to Rob. Rob's vision for building U.S. Gold is exciting."

U.S. Gold reported that as of May 13, it had 20,457,010 outstanding common shares.

The company reported a net loss of $386,368 for the quarter ended March 31, up from a net loss of $232,857 for the corresponding period in 2004.

Denver-based U.S. Gold is a gold exploration company.

Energem leads Canadian deals

Energem Resources Inc. led private placement news in Canada Friday with word that it closed a C$36.6 million unit offering.

The company sold 12 million units at C$3.05 each.

The units are comprised of one share and one warrant. The warrants allow for the purchase of an additional share at C$3.45 each through July 29, 2008.

Proceeds will be used to purchase titles to upstream oil and gas assets in Africa and to service ongoing obligations under production-share agreements. The remainder will be used for working capital and general corporate purposes.

The Vancouver, B.C.-based mineral, diamond, oil and natural gas exploration company's stock lost C$0.01 to close at C$3.20 Friday.

PDM's C$28.8 million private placement

PDM Royalties Income Fund closed a C$28,798,968 private placement of subscription receipts Friday.

The company sold 1,983,400 receipts at C$14.52 each.

The offering was completed through a syndicate of underwriters led by National Bank Financial Inc.

The proceeds, once released from escrow, will be used to indirectly acquire the trademarks and intellectual property of Scores Rotisseries BBQ and Ribs Inc. for about $32 million.

Once the acquisition is closed, the receipts will automatically convert to units of the fund on a one-for-one basis.

PDM is an open-ended trust that holds the trademarks and intellectual property of restaurants, including the Pizza Delight and Mike's Restaurants brands and licenses them for royalties.

The Moncton, N.B.-based company's stock gained C$0.26 to close at C$12.46 on Friday.

Stella-Jones leads Canadian offerings

Stella-Jones Inc. wrapped a C$5 million private placement Friday.

The company issued 555,556 shares at C$9.00 each to its majority shareholder, Stella Jones International SA.

The proceeds will be used to partially finance Stella-Jones' pending acquisition of Webster Wood Preserving Co., a Bangor, Wis.-based company that makes and markets pressure-treated railway ties.

Westmount, Quebec-based Stella-Jones produces and markets industrial structures and support components made from pressure-treated wood products.

On Friday, the company's stock gained C$0.25 to close at C$9.25.

Naturade's stock closes unchanged

A day after closing a $21 million preferred stock offering and a $4 million financing, Naturade Inc.'s stock remained unmoved.

The company's stock closed at $0.25 again Friday after making a major jump - by 108% - gaining $0.13 to end at $0.25 Thursday when the closings were announced.

The Irvine, Calif.-based health supplement manufacturer sold shares of series C convertible preferred stock to three institutional investors at $1.00 each.

The preferreds are initially convertible into one common share at $1.00 each.

Naturade sold a $3 million revolving credit line and a $1 million term note to Laurus Master Fund Ltd.

Both the note and the credit line are convertible into common shares at $0.80 each.

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