Whitehall Jewellers raises $50 million; Matrix Service stock up after $14.9 million PIPE deal

By Sheri Kasprzak

New York, Oct. 4 - Troubled jewelry retailer Whitehall Jewellers, Inc. led private placement news on Tuesday with a $50 million convertible financing agreement, but the company's stock dove more than 25% anyway.

Under the terms of the financing, which should be completed before Jan. 31, 2006, Prentice Capital Management, LP and one other investor will buy $50 million of the 12% convertible notes in an effort to pay off some of the company's debts and provide some liquidity to its operations.

The notes mature in three years, but the maturity may be extended by another two years at Whitehall's option.

The notes are convertible into common shares at $0.75 each.

The offering is contingent upon shareholder approval of a one-for-two reverse stock split. As of June 1, the company had 13,960,067 outstanding common shares.

The financing is part of a two-pronged financing solution for the jewelry company's woes. The first stage of the financing is a $30 million bridge loan due Dec. 31, 2005. The bridge loan bears interest at 18% annually and includes warrants for 2,792,462 shares, exercisable at $0.75 each for seven years.

Following word of the financing agreements, Whitehall's stock sank $0.41 to close at $1.17.

To further help with its financial troubles, Chicago-based Whitehall said it reached agreements with its banks - LaSalle, Back Bay and Bank of America - to increase the maximum borrowings under its credit facility to $140 million from $125 million.

According to Whitehall's latest earnings report, filed on June 9, the company sustained a net loss of $4,949,000 for the quarter ended April 30, 2005, up from a net loss of $3,696,000 in the year-ago period.

The company has seen its share of problems since last year when a class action lawsuit was brought against it alleging Whitehall and its officers made false and misleading statements and falsely accounted for revenue and inventory from Nov. 19, 2001 through Dec. 10, 2003.

For the first quarter of fiscal year 2005, the company was hit with a decrease by $2 million in net sales to $71 million from $73 million. Store sales for the same period decreased $2.7 million.

Matrix Service wraps $14.95 million deal

Tulsa, Okla.'s Matrix Service Co. saw its stock improve slightly after announcing the completion of a $14.95 million stock deal.

The company's stock edged up 0.37%, or $0.03, to settle at $8.14 only to lose $0.12 in after-hours trading.

Matrix sold 2.3 million shares at $6.50 apiece in an effort to repay a portion of its $35 million revolving credit line. The proceeds not used for debt repayment will be used for working capital.

As of Aug. 12, the company had 17,413,526 outstanding common shares.

In April, the company completed a $30 million private placement of senior unsecured convertible notes due April 25, 2010. The 7% notes were convertible at $4.69 each.

The company's earnings have taken a dive over fiscal year 2004. For the fiscal year ended May 31, 2005, the company reported a net loss of $38.83 million, down severely from a net income of $9,542,000 for fiscal year 2004.

Matrix provides construction, repair and maintenance services to the petroleum, petrochemical and pipeline industries.

Gentium raises $10.94 million

Heading to the biopharmaceutical sector, Gentium SpA sealed up agreements with a group of institutional investors led by Great Point Partners LLC for a $10,935,431 private placement.

The Italian pharmaceutical concern sold 1,551,125 American Depositary Shares at $7.05 each.

The investors will also receive warrants for 620,452 ADS, exercisable at $9.69 each.

The company's stock gained $0.21, or 2.7%, to finish the day at $7.99 after the offering was announced early Tuesday.

Rodman & Renshaw, LLC was the bookrunner with Maxim Group LLC and I-Bankers Securities Inc. as placement agents.

Proceeds will be used for upcoming phase III clinical trials of Gentium's product Defibrotide, and the remainder will be used for general corporate purposes.

"Recent developments, including the announcement of our upcoming phase III trial and our participation in an independent trial using Defibrotide to treat multiple myeloma, underscore the progress and exciting potential for Defibrotide in a number of target therapeutic areas," said Laura Ferro, the company's chief executive officer in a statement.

"This financing strengthens our balance sheet and allows us more flexibility in the timing of commencing some of our clinical trials. In addition, it gives us the capital to negotiate new drug development and licensing agreements from a position of strength. We are pleased with the support shown by some of our existing shareholders, as well as by the enthusiasm of recognized biotech investors such as Great Point Partners and RA Capital Management."

Back in June, Gentium completed an initial public offering for $21.6 million, selling 2.4 million ADS at $9.00 each.

The IPO was brought to market through Maxim and I-Bankers.

Based in Villa Guardia, Italy, Gentium is a biopharmaceutical company focused on treatments for VOD, a condition in which the veins in the liver are blocked from cancer treatments like chemotherapy.

Canadian energy offerings

Heading up Canadian PIPE news on Tuesday were a few oil deals, even as oil prices continue to slip.

"Stocks [in the sector] are still strong," said one market source in Canada who specializes in energy deals. "It may not last for long though, not with the way oil turned today. I suspect most [issuers] realize that they need to get whatever they can as quickly as they can."

Oil prices sank $1.57 to finish at $63.90 per barrel.

Nevertheless, Calgary, Alta.-based Arsenal Energy Inc. priced a C$10 million unit offering through a syndicate of underwriters led by Wellington West Capital Inc. and Research Capital Corp.

The offering, slated to close Oct. 31, includes 5,714,286 units at C$1.75 each.

The units consist of one share and one half-share warrant, the whole of which is exercisable at C$2.50 each for 18 months.

Proceeds will be used for exploration and drilling, the repayment of bank debt and general corporate purposes.

After the offering was announced Tuesday morning, Arsenal's stock dipped C$0.07 to settle at C$1.78.

Another Calgary-based oil explorer, Valiant Energy Inc., announced its plans to hit the private placement market with a C$6,000,500 offering of flow-through shares.

That deal, which is being placed through a syndicate of agents led by GMP Securities Ltd., is comprised of 1,091,000 flow-through shares at C$5.50 each.

The Valiant deal was also announced Tuesday morning, and its stock fell C$0.06 to end at C$4.30.

Proceeds from deal, scheduled to close Oct. 19, will be used for exploration and development as well as general corporate purposes.

Metabasis stock gains 1%

Biopharmaceutical company Metabasis Therapeutics, Inc.'s stock made slight gains on Tuesday following the closing of a $41.3 million private placement.

The company's stock closed up $0.06 at $6.06 Tuesday.

On Monday, when the closing was first announced, Metabasis's stock ended up 2.92%, or $0.17, at $6.00.

One market source familiar with the sector said that even though the PIPE did help the company's stock, the sector in general has been trending upward.

"Sure, it made things a bit better [for their stock], but it's a trend, at least for the past couple of sessions," he said. "Biopharma shares have been trading a bit higher, so it's really hard to say what's pushing them."

San Diego-based Metabasis issued shares at $5.86 each.

The company makes products used to treat chronic diseases involving the pathway to the liver.

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