Heritage-Crystal Clean says placement rewards staff; SMF raises to keep listing; Sonoran sells convertibles

By Kenneth Lim

Boston, March 14 - Heritage-Crystal Clean Inc. said its $13.8 million direct placement of common stock was a way to reward employees as the company embarked on an initial public offering.

Meanwhile, SMF Energy Corp. said it sold $1.79 million of equity securities in a private deal as it reported "significant progress" on acquisition and business combination opportunities.

Sonoran Energy Inc. said it raised $3 million through a sale of convertible preferred stock and warrants to develop its existing projects.

Heritage-Crystal sells to employees

Heritage-Crystal Clean sold $13.8 million of its common stock in a direct placement, the company said Thursday.

The placement involved 1.2 million shares at $11.50 each, with an over-allotment option for an additional 287,100 shares. The placement was carried out concurrently with Heritage-Crystal Clean's initial public offering of 1.9 million shares at the same price.

Heritage-Crystal Clean common stock (Nasdaq: HCCI) closed at $13.56 on Friday, down by 2.24%, or 31 cents.

The company, an Elgin, Ill.-based provider of parts cleaning and containerized waste services, said the proceeds of the placement will be used to repay debt under its secured bank credit facility.

"Unlike many IPOs that are done to raise capital because the company is consuming cash and funding growth, we are using the proceeds to rationalize our capital structure ... and pay down debt," Heritage-Crystal Clean chief financial officer Gregory Ray told Prospect News. "Our driver for raising was not so much capital, but because we are a service company, and we want to give our employees and partners a chance to participate in the ownership of the company."

Using stock is one way to motivate the company's staff, whose loyalty and well-being were at the top of Ray's mind on Friday as he spoke from a sales summit for top-performing employees in Mexico.

"If we wanted to simply raise money to reduce debt, it could have occurred at any time, and we could have done it earlier or later," Ray said. "We thought that it was a good way for us to do this publicly, it's good for the employees, which in turn is good for the company because it helps in retaining and motivating our employees."

Ray said Heritage-Crystal Clean has seen a good response to its placement and IPO.

"Clearly the investors received the IPO quite well," he said. "We actually increased the size of the offering. It was initially supposed to be about 1.7 million shares."

SMF raises $1.79 million

SMF Energy said it sold $1.79 million of convertible preferred stock to holders of its convertible promissory notes.

The company issued 1,985 series B convertible preferred shares to holders of its 11.5% senior secured convertible promissory notes issued on Aug. 7, 2007. The holders exchanged $1.79 million in notes, plus a portion of the accrued interest on the notes, for preferred stock.

The notes were exchanged at $900 per series B preferred share. Each preferred is convertible into 1,000 common shares at $0.90 per share. SMF common stock (Nasdaq: FUEL) gained 1.12%, or $0.01, to close at $0.90 on Friday.

Based in Fort Lauderdale, Fla., SMF provides petroleum product distribution services, transportation logistics and emergency response services to the trucking, construction, utility, energy, chemical, manufacturing and government services industries.

The company received notice from Nasdaq in February because it failed to meet the exchange's listing requirements related to stockholders' equity, market value and net income. The company has since been actively raising its stockholders' equity.

On March 6, SMF issued $2.52 million of series A convertible preferred shares in exchange for $2 million principal amount of short-term promissory notes issued on Nov. 19, 2007.

"We continue to realize the benefits of the support of our investors which has been demonstrated by their actions to increase shareholders equity and further improve our financial position," SMF president Richard E. Gathright said in a statement. "We recognize that their confidence in the company is derived from our continuing efforts to improve performance by reducing costs and achieving greater efficiencies in operations."

Gathright added that the company sees value in "the acquisition and business combination opportunities before us which are now possible through the improvements in our infrastructure operating abilities."

"Significant progress has been made on several of these growth opportunities, which we believe could provide substantial strategic and financial value to the company and its shareholders," Gathright said. "As a larger, more diversified business, we would be in a position to generate a significant return on the investments that we have made in our company over the past several years."

Sonoran raises $3 million

Sonoran Energy said it sold $3 million units of convertible preferred stock and warrants in a private deal that settled on Wednesday.

The placement involved 3 million units of one series A convertible preferred share and one warrant at $1.00 per unit. Each warrant is exercisable for nine of the preferreds at $1.00 per preferred for five years. Each preferred is convertible into 20 shares of common stock.

Sonoran common stock (Pink Sheet: SNRN) closed at $0.08 on Friday, down by a penny, or 11.11%.

Sonoran, a Dallas-based independent oil and gas exploration and production company, said it will use part of the proceeds to conduct an orderly suspension of its Louisiana work-over program. The rest of the proceeds will be used to begin a work-over of up to 14 wells in the KWB field in Central Texas.

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