Assured lands $1 billion investment; Alexis eyes production with C$11.7 million placement

By Kenneth Lim

Boston, Feb. 29 - Assured Guaranty Ltd. is where billionaire investor Wilbur Ross has finally decided to place up to $1 billion in cash, the company said Friday.

Assured, a bond insurer, said it has agreed to sell $250 million in stock to WL Ross & Co. LLC and has the option of selling another $750 million in shares. Ross, who has been vocal over the past month about making an investment in the industry, controls WL Ross.

Meanwhile, Alexis Minerals Corp. announced plans to conduct a C$11.7 million private placement of units that it said will give it enough gas in the tank to enter into production.

TXCO Resources Inc. also announced a $20 million private placement of 6% convertible preferred stock.

Assured lands Ross investment

Hamilton, Bermuda-based Assured Guaranty, a bond insurer, said it could raise up to $1 billion from a private placement of shares.

The company will sell WL Ross $250 million in stock and has to option to sell another $750 million in shares.

The price per common share for the initial investment of $250 million will be the higher of 97% of the average of $22.43 (the company's NYSE closing price on Feb. 22) and the average NYSE closing price for Feb. 29 and March 3 or $21.76 (97% of $22.43). Assured stock (NYSE: AGO) rose $2.87, or 12.6%, to close at $25.65 on Friday.

The additional $750 million commitment by WL Ross is available at Assured's option for one year from settlement of the $250 million investment. The price for subsequent investments will be 97% of the volume-weighted average price of the company's common shares for the 15 trading days prior to notice of any subsequent investment.

As part of the deal, Ross will also be appointed to Assured's board of directors.

"We are extremely pleased that Wilbur Ross has chosen Assured as his preferred investment vehicle in the financial guaranty industry," Dominic Frederico, Assured president and chief executive, said in a press release. "This flexible capital source will allow us to continue to capitalize on the significant growth opportunities we see and will support our further expansion in both the direct and reinsurance markets."

In the same release, Ross said, "We believe that Assured has an excellent opportunity during this time of uncertainty in the financial markets to provide investors with credit enhancement products in both the public and structured finance markets. We look forward to a long and profitable association with Assured."

Over the past few weeks, Ross has made no secret about his intention to invest in the bond insurance sector, which has seen major players MBIA Inc. and Ambac Financial Group Inc. struggle with reviews by the ratings agencies.

Assured has no exposure to the collateralized debt obligations and credit default swaps that have caused most of the credit problems and has been relatively unscathed, Assured investor relations and strategic planning managing director Sabra Purtill told Prospect News.

"Mr. Ross has been pretty vocal and visible on the media, like CNBC, in the past few weeks talking about his interest in the sector," Purtill said. "Obviously he has offered us that option, which we negotiated and accepted. The investment is really a strategic investment on his part. We have enough capital. We were not on the market at all. ... Certainly we appreciate the opportunity to grow our market presence, but it's not that we needed capital."

Nevertheless, Assured believes the extra money will be useful under current market circumstances, Purtill said.

"There is increased demand for our services given the problems that have affected our industry," she said. "Given the strong increase in demand, we believe there are opportunities out there that we would like to pursue. Mr. Ross is a very experienced investor, and that he decided to pick us, that's definitely a very strong statement for us."

After taking the $250 million worth of stock, Ross will likely be Assured's fourth-largest investor, Purtill said. Only if the option for the additional $750 million is fully exercised will Ross become Assured's largest investor.

Purtill said the discounted price of the placement was negotiated between Ross and Frederico.

"You know how CEOs and investors like to negotiate with one another," she said.

"I think the 3% was basically meant to reflect that if we had done a public offering that would have been what we might have paid to an investment bank," Purtill said. "Although we probably would have paid more if we had done a public offering. I think Mr. Ross at least wanted to get the benefit of a slightly reduced price."

Alexis eyes next phase with sale

Alexis Minerals Corp. said it plans to sell C$11.7 million of units to transform into a producer and become free cash flow positive.

Alexis, a Toronto-based mineral exploration company focused on gold and base metals, said it will sell 16.7 million units of one common share and one half-share warrant at C$0.70 per unit. Each whole warrant will have a strike price of C$1.00 and expire after two years.

Alexis stock (TSX: AMC) closed at C$0.72 on Friday, lower by C$0.05.

The warrants may expire sooner if the company's shares close at C$1.50 or higher for 20 consecutive trading days. In that case, the warrants will expire 30 days after the company notifies holders.

Proceeds will be used for exploration, development and general working capital purposes.

Alexis is pursuing the fundraising at this time because it is on the verge of entering into production, president and chief executive David Rigg told Prospect News.

"The plan is that by end of year we will have C$12 million in the bank," Rigg said. "We will have one deposit in production, one heading into production, and at that point we will be free cash flow positive well into the future."

A mining veteran, Rigg turned philosophical when explaining the importance of the fundraising.

"I never start a project unless I have the cash in the bank to do it," he said. "The reason is it's a commitment to the people who are working for you. I don't want to put us in a position where we have no cash to move forward. You lose the confidence of the people who work for you and the other companies that work with you. And also it becomes more expensive to do business when people see weakness."

Rigg said he had been trying to arrange debt financing for the past 18 months, but banks were reluctant to lend Alexis the money that it needed.

"One of the problems you have with a short, three-to-four-year reserve is the bank looks at the current gold cycle, the mine and so on, and the most recent review was that we're not somebody the bank can loan to ... I would have liked to do debt facility, but I came back from the banks and they said it's too small for the bank to look at."

He acknowledged that the equity financing was dilutive to the company's existing stock, but he believes that it will pay off in the long term.

"That's what the market will pay right now," he said. "I think the Alexis stock is worth more than that [C$0.70], but ... in the long term I think it puts us in a very solid position. Nobody can move us from the top of the mountain on our way to the next stage."

He said the equity financing was "cash on the table" that will give Alexis the support necessary to generate its own cash.

"This year is really a question of matching outgoing expenses with incoming revenue," he said. "The first part of the year we will have a lot of capital spending, the second part of the year we will have a lot of cash inflow."

TXCO to raise $20 million

TXCO said it will raise $20 million in a private sale of series E 6% convertible preferred stock.

The preferreds will be convertible into common shares at $17.36 per common share. TXCO stock (Nasdaq: TXCO) closed at $13.92 on Friday, lower by 3.8%, or $0.55.

TXCO, a San Antonio-based oil and gas company, said it will use the proceeds to fund its drilling program, repay debt and fund working capital and general corporate purposes.

"TXCO currently has high-potential growth catalysts and this transaction will help us further expand our growth plans on an opportunistic basis," chairman and chief executive James E. Sigmon said in a statement.

"The funds will complement our previously announced plans to accelerate activity this year on the Pearsall shale gas resource play, San Miguel oil sands project and Glen Rose Porosity oil play in our core Maverick Basin area. We also plan to expedite drilling in TXCO's East Texas Fort Trinidad Field, where we're targeting the Glen Rose gas shoals. We remain confident that we will be successful in one or more of these prospects so we have also included a convertible hedge overlay to reduce dilution to our current TXCO stockholders."

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