Linn wraps $305 million PIPE; Environmental Power to close $15 million convertible preferreds sale

By Sheri Kasprzak

New York, Oct. 24 - As oil prices edged their way higher, a couple of substantial energy offerings surfaced in the private placement market Tuesday.

The deals were led by a $305 million deal from Linn Energy, LLC. In Canada, Mart Resources, Inc. priced a C$17.75 million offering of convertible notes.

Given the slump in oil prices, one market source based in Vancouver, B.C., said the offerings indicate that there still is investor demand in oil deals.

"I find it interesting that the minute oil prices improve the slightest, there are [issuers] pushing something new out," he said. "Granted, they may have to settle for less than what they want in terms of pricing, but the fact that investors are willing to buy is a good sign."

Oil prices gained 54 cents to end the session at $59.35 per barrel.

Linn sells trust units

In the Linn deal, the company sold 5,534,687 class A trust units at $21.00 each and 9,185,965 class B units at $20.55 each. The A units were sold at a 7.9% discount to the company's $22.80 closing stock price on Monday and the B units at a 9.9% discount to the same closing stock price.

The deal was announced late Tuesday, and the stock gained 19 cents to settle at $22.99 (Nasdaq: LINE).

"We are very pleased to have received such a high level of support from both existing investors and new investors in Linn Energy," said a statement from Michael Linn, the company's chief executive officer. "The timing of the private placement demonstrates our ability to acquire finance assets quickly and efficiently. Furthermore, we are pleased to have the support of some of the premier investors in our sector."

Investors in the deal are led by Zimmer Lucas Partners, LLC and include GPS Partners LLC; Lehman Brothers MLP Partners, LP; Principal Strategies Group of Goldman, Sachs & Co.; Magnetar Capital; Alerian Capital Management LLC; RCH Energy; and Strome Investment Management, LP.

Proceeds will be used to repay in full the company's $250 million bridge facility and $55 million in borrowings under its revolving credit facility.

Linn Energy, based in Pittsburgh, is an oil and natural gas development and acquisition company.

Mart's offering

In the Mart deal, the company said it plans to sell C$8,875,000 in secured notes and C$8,875,000 in unsecured notes.

The two-year notes both bear interest at 8% annually.

The unsecured notes are convertible into units of one share and one warrant at C$0.75 each and the secured notes are convertible into units of one share and one half-share warrant at C$0.75 each.

The warrants issued upon conversion of the unsecured notes are exercisable at C$0.75 each for two years and the warrants issued upon conversion of the secured notes are exercisable at C$0.90 each for two years.

On Tuesday, the company's stock closed unchanged at C$0.60 (TSX Venture: MMT).

Proceeds will be used for the repayment of C$8,875,000 in existing convertible notes. The rest will be used for drilling and testing wells on the Umusadege oil field and the Qua Ibo oil field in Nigeria, as well as for working capital.

Calgary, Alta.-based Mart is an oil and natural gas exploration company.

Energy Fuels' C$10 million deal

Connected to the energy sector, Energy Fuels Inc. priced a C$10 million private placement of units at C$1.40 each.

The offering includes up to 7,142,857 units of one share and one half-share warrant with each whole warrant exercisable at C$1.75 for 18 months.

The deal is being placed through a syndicate of agents led by Wellington West Capital Markets Inc.

The placement is expected to wrap up on Nov. 23.

Proceeds will be used for mine development and production, property acquisitions, exploration, mill engineering and licensing, as well as general corporate purposes.

Toronto-based Energy Fuels is a uranium and vanadium exploration and production company.

Environmental to raise $15 million

Elsewhere in PIPE action Tuesday, Environmental Power Corp. said it plans to close within the next 30 days a $15 million private placement of 9% series A cumulative convertible preferred stock.

News of the deal sent the company's stock up 19.09% Tuesday, gaining 97 cents to end at $6.05 (Amex: EPG).

Volume of EPG's shares traded also took off with 337,100 shares traded compared to the average 43,946 shares.

The preferreds, purchased by a group of institutional investors, are convertible into common shares on the basis of one preferred into 10 common shares.

The preferreds will be sold in 281,241 units of one preferred and warrants for five common shares at $53.335 each.

Each warrant is exercisable at $5.522 each for five years.

Proceeds will be used for the construction of renewable energy facilities under development by subsidiaries Microgy, Inc. and Microgy Holdings, LLC. The remainder will be used for general corporate purposes.

Located in Portsmouth, N.H., Environmental Power develops and operates renewable energy production facilities.

VioQuest raises $3.95 million

Moving to the biotech sector, VioQuest Pharmaceuticals, Inc. wrapped a $3,945,800 offering.

The company issued 7,891,600 shares at $0.50 apiece to 71 investors.

The investors received warrants for 2,762,060 shares, exercisable at $0.73 each for five years.

Paramount BioCapital, Inc. was the placement agent.

On Tuesday, the company's stock gained 2%, or a penny, to end at $0.51 (OTCBB: VQPH).

"We are gratified by the ongoing support from our existing shareholders and the confidence exhibited by new shareholders," said Daniel Greeleaf, chief executive officer of VioQuest, in a news release. "We believe these funds, in addition to our ongoing exploration of strategic options for our Chiral Quest business which may include receiving funds from its potential sale, will strengthen our balance sheet as we continue to meet our clinical goals.

"With two compounds in four clinical trials and a potential [New Drug Application] filing in 2007 for one of our product candidates for a non-cancer application, our corporate targets are being met according to our planned objectives."

Based in Basking Ridge, N.J., VioQuest develops and commercializes preclinical and clinical stage therapies for cancer, viruses and autoimmune disorders.

Lexicon stock slips

In secondary biotech news, Lexicon Genetics Inc.'s stock dropped a day after the company announcing a $40 million direct offering Monday.

The company's stock gave up 7 cents, or 1.82%, to end at $3.78 (Nasdaq: LEXG). On Monday, the stock gave up 5.17%, or 21 cents, to settle at $3.85.

Volume remained elevated with 214,302 shares traded compared to the average 156,180 shares. There were 613,007 shares traded on Monday, compared with the average 149,976 shares.

In the placement, which is set to close Wednesday, the company will sell shares at $3.78 each, a 6.9% discount to the company's $4.06 closing stock price on Friday, to a group of institutional investors.

The shares will be sold under the company's shelf registration.

Proceeds will be used for research and development, including preclinical and clinical development of the company's lead programs. The rest will be used for acquisitions, business investments and working capital.

Based in The Woodlands, Texas, Lexicon Genetics develops treatments for diseases like diabetes, obesity, cardiovascular disease, psychiatric and neurological disorders, cancer, immune system disorders and ophthalmic disease.

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