Guaranty, Standard Pacific land new investors; Helio raises for project; Discovery Labs gets equity facility

By Kenneth Lim

Boston, May 27 - Guaranty Financial Group Inc. landed a $38.26 million investment from Texas businessman Robert Rowling, who said he is seeking more acquisition opportunities in the financial sector.

Helio Resource Corp. said its previously announced $5.1 million capital raise is a significant step toward advancing its project in Tanzania.

Meanwhile, Standard Pacific Corp. said it is selling $381.25 million of senior convertible preferred shares to an investor to boost its balance sheet, while Discovery Laboratories, Inc. announced a $60 million equity financing facility with Kingsbridge Capital Ltd.

Guaranty secures Rowling investment

Guaranty Financial said it has arranged a $38.26 million private placement of stock.

The company will sell 7.4 million shares at $5.17 apiece to TRT Financial Holdings, LLC, a company controlled by Rowling. TRT's holdings include the Omni hotel chain and Gold's Gym fitness centers.

Guaranty common stock (NYSE: GFG) jumped 16.39%, or $0.89, to close at $6.32 on Tuesday.

Guaranty, a Charlottesville, Va.-based bank, said it will use the proceeds to strengthen its balance sheet and for growth.

"We are very excited about Rowling's investment in Guaranty," Guaranty president and chief executive Ken Dubuque said in a statement. "Rowling, TRT Financial Holding's chairman, is a highly respected businessman in Texas and around the country. This investment and the previously announced rights offering will allow us to fortify our balance sheet and support long-term growth."

Guaranty on May 1 announced a rights offering that will allow shareholders to buy additional stock at a discount. The company said on May 21 that it is offering up to $350 million of stock, although pricing has not been set.

The deal with TRT also provides that, 120 days after the initial stock purchase, Rowling will buy new convertible preferred stock from Guaranty that will result in him controlling 19.9% of Guaranty's total outstanding stock, assuming full conversion.

In a statement, Rowling said, "Guaranty and its team are well known to us. TRT has done business with Guaranty for many years. We know the quality of their team, and we understand the tremendous value of their franchise. I am very excited about this transaction and I look forward to the opportunity to obtain additional shares of Guaranty's common stock in connection with Guaranty's previously announced rights offering."

The investment is the first for Rowling in the financial space since the early 1990s, when he sold Corpus Christi National Bank to what is now Bank of America, Rowling told Prospect News.

"We'd been looking to get back in the financial space," Rowling said. "We've been looking for opportunities in the financial space because we haven't been in the space since the early '90s after we sold Corpus Christi to Bank of America."

The current problems in the financial sector are creating many opportunities for an investor like Rowling, he said.

"Guaranty, like many small banks, were looking for some new equity capital," he said. "We knew them because we'd worked with them previously. We knew them and we have a lot of confidence in their management team."

Rowling said he will continue looking to buy financial businesses through TRT.

"I think we're going to look to be an acquirer," he said. "There's a lot of opportunities in the small bank market."

Helio seeks new investor

Helio Resource said its C$5.1 million private placement of units will likely last it for the year and help it to land a new investor.

Helio said it is selling 6 million units a C$0.85 each on a bought-deal basis through Primary Capital Inc. The units comprise one common share and one half-share warrant with each whole two-year warrant exercisable at C$1.10 for the first year and at C$1.25 in the second year.

Helio common stock (TSX: HRC) closed at C$0.81 on Tuesday, lower by 1.22%, or C$0.01.

Proceeds will be used for general corporate working capital.

Based in Vancouver, B.C., Helio is a mineral exploration company focused on high-quality project generation in southern Africa.

Helio's main project at the moment is its Saza-Makongolosi Project (SMP) in Tanzania, and the company wants to carry out further studies there before it seeks out joint venture partners, Helio corporate communications director Irene Dorsman told Prospect News.

"This money will be used for working capital and for Tanzania," she said.

The additional capital should last the company for the year, and the company does not expect to have to raise money again soon.

"The whole reason we did this financing is to help keep us going on the SMP project for the next year," she said.

Helio decided to do the non-flow through capital raise because that was what the market wanted, she said.

"I think we just feel more comfortable with this," Dorsman said. "We've entered into an agreement and we'd like to have this partner. It takes time to get to know new partners, and this will be a party we would like to have on board."

Dorsman said the company was satisfied with the pricing of the deal.

"Everybody knows the market is very difficult at this moment," she said. "If you look at our stock it has been moving between around C$0.89 and C$0.82, so I think C$0.85 is a pretty good price."

Standard Pacific to raise $381.25 million

Standard Pacific said it is selling $381.25 million of new convertible senior preferreds to investor MatlinPatterson Global Advisers LLC.

The 381,250 preferreds were sold at $1,000 apiece.

Upon receiving stockholder approval, the preferreds will convert into an equal amount of convertible junior preferreds that are generally equivalent to common stock. Each junior preferreds will in turn be convertible into Standard Pacific common stock at $3.05 per common share.

Standard Pacific common stock (NYSE: SPF) closed at $3.29 on Tuesday, higher by 48.2%, or $1.07.

If stockholder approval for the deal is not obtained by Sept. 15, the senior preferreds will pay a dividend of 17% for the first six months and an additional 0.5% every six months until approval is obtained, capped at a maximum dividend rate of 20%. The junior preferreds will pay the same dividend as the common stock.

In addition to its cash equity investment, MatlinPatterson will exchange approximately $128.5 million of the company's senior and subordinated debt for warrants exchangeable for preferred stock, representing 89.4 million common shares, at an exercise price of $4.10 per share.

MatlinPatterson will also be able to nominate three directors to Standard Pacific's board.

Standard Pacific is an Irvine, Calif.-based builder and seller of single-family attached and detached homes.

"This capital infusion will strengthen our balance sheet, enhance our financial flexibility and provide funding for future growth opportunities," Standard Pacific chairman, chief executive and president Jeffrey V. Peterson said in a statement. "The transaction enables our existing shareholders to participate in the rights offering and benefit from the upside potential created by the investment. Through our exploration of alternatives, we have identified MatlinPatterson as the ideal partner to provide the company with additional liquidity and operating flexibility. MatlinPatterson's investment demonstrates its confidence in Standard Pacific's management team and the company's underlying value and growth potential. MatlinPatterson is a long-term investor committed to our company's success."

In a letter to employees of Standard Pacific, Peterson wrote, "Looking ahead, this investment will allow us to reenergize our operations and aggressively seek new opportunities in an undervalued market. There are no planned changes to our management team and we expect our operations to only be enhanced by this capital infusion. We now have a terrific opportunity to continue to deliver the same quality that homebuyers have come to expect from us while enhancing our readiness and position for a market recovery."

MatlinPatterson chief executive David Matline also said, "In a difficult operating environment, Standard Pacific has a strong franchise and is well positioned for renewed profitability and success as conditions improve. We are pleased to partner with the talented management team and employees of Standard Pacific, to build on their long history as one of the nation's leading homebuilders."

Discovery Labs secures financing

Discovery Laboratories said it has negotiated a $60 million equity financing facility with Kingsbridge Capital.

The facility commits Kingsbridge to purchasing up to 19.3 million common shares for up to $60 million over three years at Discovery's option.

Discovery may access capital in tranches up to the lesser of $10 million and 3% of its market capitalization at the time of the draw down, subject to certain conditions.

The shares in each tranche will be issued and priced over an eight-day pricing period and sold at discounts ranging from 6% to 12%, depending on the volume-weighted average market price of the common stock during the eight-day period.

The minimum acceptable purchase price for the shares is determined by the higher of $1.15 or 90% of the volume-weighted average price of Discovery's common stock the day before the beginning of each tranche.

Discovery common stock (Nasdaq: DSCO) gained 4.71%, or $0.08, on Tuesday to close at $1.78.

Kingsbridge also received a warrant for 825,000 common shares, which is exercisable at $2.51 per share for five years.

Based in Warrington, Pa., Discovery develops treatments for respiratory diseases in children, adults and premature infants.

"This new CEFF, coupled with our existing cash and our 2006 CEFF, significantly improves the company's financial flexibility to support the potential commercialization of Surfaxin for the prevention of respiratory distress syndrome in premature infants and the development of our respiratory pipeline," Discovery chief financial officer John G. Cooper said in a statement. "Our ability to choose the timing and amount of financings under our CEFF arrangements has the potential to minimize dilution for our shareholders."

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