Private placement volume remains weak; Moscow CableCom closes $51 million deal

By Sheri Kasprzak

Atlanta, Jan. 13 - Issuance in the private placement market continued to suffer from an abysmal stock market Thursday, even though higher oil prices may help the Canadian energy companies that make up the majority of private placement offerings there.

As stocks took a tumble Thursday, issuers bided their time, waiting for the market to improve, sell-siders said.

"Have you seen the stock market today?" asked one sell-side source. "It's not pretty and I really think issuers are just waiting for market conditions to improve before getting their deals out there."

The Dow Jones Industrial Average plummeted 111.95 Thursday to end at 10,505.83, the Nasdaq composite ended the day 21.97 lower at 2,070.56 and the S&P 500 closed down 10.25 at 1,177.45.

Oil prices, on the other hand, may actually benefit the private placement market in Canada.

Since energy companies make up the majority of the private placement issues in Canada, one sell-side source there believes there will be a surge in issuance among oil companies.

On Thursday, oil climbed $1.67 to end at $48.04 per barrel.

"Well, oil prices are rising because it's winter," the Canadian sell-sider said. "Naturally, that's going to help energy stocks and therefore issuers in that industry. It's my belief that over the next few weeks we'll see a definite increase in the number of oil companies with offerings."

Meanwhile, in the United States, Moscow CableCom led action with the closing of its $51 million private placement of series B convertible preferreds.

The company sold 8,283,000 shares of the preferreds to one investor for $22.5 million.

The investor also received warrants for an additional 8,283,000 shares of series B preferreds at $5 each.

Moscow CableCom's subsidiary ComCor-TV also received $18 million as part of a $28.5 million debt facility from the investor. Additional details about the debt facility were unavailable Thursday.

The proceeds from the debt facility will be used to pay off a $4 million bridge loan.

ComCor and Moscow Telecommunications Corp. are in the process of amending their agreements regarding the use of MTC's Moscow Fiber Optic Network. The amendment was a condition to the financing.

Based in New York, Moscow CableCom provides telecommunications services to homes and businesses in Moscow.

On Thursday, Moscow CableCom's stock closed unchanged at $6.11.

Presidion raises $25 million

Presidion Corp. sold 2,500 shares of series AA preferred stock to a single investor to wrap a $25 million private placement.

The preferreds pay an annual dividend of $1,000 per share and are not convertible.

The preferreds are redeemable at face value at any time.

The investor also has the option to acquire up to 25% of Presidion's common stock at the current market price.

"The completion of this transaction, along with the other accomplishments over the past two months, including debt restructuring, the placement of convertible preferred stock, board changes and marketing partnerships, positions Presidion to enter 2005 as a strong, energized company," said Presidion's president and chief executive officer Craig Vanderburg, in a statement.

Presidion, based in Troy, Mich., provides human resources management services to small- and mid-sized companies.

Presidion's stock closed down $0.01 at $0.14 Thursday.

Aastrom closes $24 million deal

Aastrom Biosciences Inc. finished the final tranche of a $24 million private placement for $12 million.

The offering included 4.8 million shares at $2.50 each to a single investor.

The deal priced at a 5% premium to the closing price of Aastrom's stock on Jan. 10. On Jan. 10, the company's stock closed at $2.38.

The reason the deal priced at a premium, said one market source, was because of the company's strong stock.

"This company has seen some incredible gains," the source said. "They're getting ready for some clinical trials and I think that may be pushing their stock. Stem cell research is really controversial right now, so I think just the buzz behind that may be responsible for their gains."

Even so, Aastrom bucked the trend on Thursday when its stock dropped $0.17 to close at $2.59.

Aastrom is an Ann Arbor, Mich.-based regenerative medicine company that develops treatments to repaid damaged human tissues.

Knockout plans offering

Knockout Holdings Inc. said it will head to the private placement market with a $6 million offering.

The company plans to sell up to 127,950 shares of series B preferred stock at $46.89 each.

The preferreds pay dividends of 10% of the stated value annually.

The preferreds will automatically convert into common shares after Knockout amends its certificate of incorporation at a price of $0.2931.

Warrants for up to 2,047,200 shares at $2.25 each for five years were also included in the deal.

A first closing of the private placement was completed on Jan. 10 for a total of $3,265,000.

Duncan Capital LLC is the placement agent.

Knockout Holdings, based in New York, is a holding company for AccessNewAge Corp., which sells New Age products and services online.

Knockout's stock closed up $0.12 at $1.12 on Thursday.

OptiCare raises $4.45 million

OptiCare Health Systems Inc. finished a private placement for $4,445,000.

The company sold 280,618 shares of series D preferred stock at $15.84 each to one institutional investor and one individual investor.

Each preferred is convertible into 40 common shares at a price based on the closing market price for five days before the transaction.

Separately, the company also sold the assets and liabilities of its distribution division for $4.15 million.

OptiCare, based in Waterbury, Conn., is an eye-care services company specializing in vision benefits management and consumer vision services. The proceeds from both the private placement and the sale of the distribution division will be used to pay down debt.

On Thursday, OptiCare's stock closed up $0.01 at $0.43.

Ramp wraps $4 million offering

Ramp Corp. has received agreements from three institutional investors for a $4 million private placement.

The company will sell up to $4 million in convertible redeemable debentures, which are convertible into common stock at $2.40 each. The two-year debentures bear interest 8% annually.

The investors will also receive warrants for up to 100% of the shares issuable upon conversion at $2.40 each.

The company has already closed a $2 million tranche and a second tranche for another $2 million is expected to close soon.

Separately, the company also expects to raise up to $25 million in an equity line from the investors in the private placement. The company will sell shares at an 8% discount to the 10-day market price for every draw on the line.

The details of the equity line will be released at a later time, the company said.

"This financing positions us to grow the deployment of our CarePoint and CareGiver technologies in their respective markets, while continuing to aggressively expand their future feature," said the company's chief executive officer and president Andrew Brown, in a statement.

"In addition, the equity line affords us with additional liquidity, through an attractive form of financing, as needed. This two-pronged financing, and the quality institutional investors with whom we have completed it, should provide us with the necessary capital to grow our business toward profitability."

Ramp, based in New York, develops and markets software for long-term care facilities and other healthcare providers.

Ramp's stock closed up $0.33 at $2.81 on Thursday.

Transnational closes $2.7 million deal

Transnational Financial Network Inc. sold $2,687,700 in convertible subordinated notes.

The 10-year notes bear interest at 8.5% annually and are convertible into common shares at $1 each.

"We are excited about the prospect of achieving this next level in our business strategy to begin to sell bulk loans, rather than our historic practice of selling loans one at a time," said the company's chief executive officer Joseph Kristul, in a statement.

"This long-term change in our capital structure and change in our secondary-market operations together should increase our long-term profitability substantially. Furthermore, I believe, this additional capital and its use to increase our gain on sale should help us remain reasonably profitable if the mortgage markets slow down in the face of rising interest rates in the coming year."

Based in San Francisco, Transnational is a wholesale and retail mortgage banking firm. The company plans to use the proceeds from the deal as collateral to expand its warehouse facilities, to finance the closing of bulk home equity lines and to position the company to achieve as much as a 300 basis points gain on sale-on-production through the use of bulk sale contracts for a portion of the mortgages it originates.

Transnational's stock closed unchanged at $0.59 Thursday.

Network 1 wraps second tranche

Network 1 Security Solutions Inc. completed the second tranche of a $2,685,000 private placement for $600,000.

The offering consisted of 600,000 shares sold at $1 each.

In the entire offering, 2,685,000 shares were sold.

Three-year warrants for a total of 2,013,750 shares were also issued in the deal. The price of 1,342,500 of the warrants was set at $1.25 each and 671,250 were priced at $1.75 each.

Based in New York, Network 1 acquires, develops, licenses, and protects data networking and telecommunications technologies. The company plans to use the proceeds for working capital.

Network 1's stock closed down $0.02 at $0.95 Thursday.

Canadian offerings

Heading up private placement action in Canada, Cyries Energy Inc. said it plans to raise C$20,008,000.

The company intends to issue 2.44 million shares at C$8.20 each.

The deal is being placed through a syndicate of underwriters led by FirstEnergy Capital Corp.

Based in Calgary, Alta., Cyries is an oil and natural gas exploration, development and production company. It plans to use the proceeds from the offering to fund its 2005 capital expenditure program.

Cyries's stock closed down $0.05 at $8.40 Thursday.

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