By Ronda Fears
Nashville, March 19 - Semco Energy Inc. sold $50 million of convertible preference shares plus warrants to K-1 GHM LLLP, an affiliate of the Singapore-based private equity firm k1 Ventures Ltd., in a private placement arranged by Credit Suisse First Boston.
The issue is in two tranches, initially $31 million, and the remainder by June 30.
The issue is convertible into Semco shares at a conversion price of $6.6257 per share; the stock closed Friday at $5.80.
Non-cash dividends will accrue at 6% for three years and then increase annually by 1% to a maximum rate of 10%. If converted, the issue would represent about 7.5 million shares, or 21%, of outstanding Semco common stock.
In addition, the company issued to K-1 detachable warrants to purchase 905,565 additional common shares at an exercise price of $6.6257.
Farmington Hill, Mich.-based Semco, formerly Southeastern Michigan Gas Co., is a diversified energy and infrastructure services company. The company said it would use proceeds to repay existing debt, reflecting a continued focus on strengthening its balance sheet and improving its credit ratings.
In conjunction with the transaction, K-1 will have the right to nominate two members to Semco's board of directors or to appoint at least 22% of its members, whichever is greater.
"This transaction represents the next step in the company's ongoing efforts to improve its credit quality and to increase book equity. Along with other previously announced strategic actions, the company is committed to focusing on its gas distribution businesses," said George A. Schreiber Jr., chief executive of Semco.
"Further, K-1's investment is a much needed equity capital infusion which will greatly assist the company's efforts to meet operating and financial goals."
In its 2003 annual report, Semco said it expects earnings of 28 to 32 cents per share for 2004. The company projected capital expenditures at $35 million for the year.
In August 2003, the company issued 8.74 million shares of stock when its $101 million of 9% convertible preferreds, in the Feline Prides structure, matured.
Terms of the deal are:
| Issuer: | Semco Energy Inc.
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| Issue: | Convertible preference shares
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| Placement agent: | Credit Suisse First Boston
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| Amount: | $50 million
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| Maturity: | Perpetual
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| Dividend: | 6%, stepping up to 10% maximum
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| Conversion price: | $6.6257
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| Pricing date: | March 19
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| Distribution: | Private placement
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