Regency Energy raises $80 million; VirnetX wraps stock placement; Optare aims for £8.6 million

By Stephanie N. Rotondo

Portland, Ore., Sept. 3 - With the broader market gearing up for a three-day weekend, the private placement market was relatively busy Thursday, with deals of all sizes coming.

Regency Energy Partners LP announced it had taken in $80 million from a private placement of preferred share units. The funds will be used to buy additional ownership interest in a joint venture project from a GE Financial Services affiliate.

Meanwhile, Virnetx Holding Corp. said it raised $6 million from a sale of stock and warrants and, once the warrants are fully exercised, should raise another $6 million. A company spokesperson said the funds would help pay for litigation against Microsoft Corp. and would also help to bring potential licensees on board.

Optare plc also said it would issue new ordinary shares in its effort to raise £8.6 million. The company plans to use proceeds to develop a range of low-carbon producing buses.

Elsewhere, Bonds.com Group Inc. settled the first tranche of its $5 million placement of units, taking in $1 million. The remaining funds are expected to close within 90 days.

Shaw River Resources Ltd. hopes to raise A$5 million to advance its drilling program. The company will issue stock in the private placement financing.

Regency takes in $80 million

Regency Energy received $80 million from a private placement of preferred share units, according to a press release.

The company's sold the series A convertible preferred units at $18.30 each. The units pay a fixed quarterly dividend of $0.445 per unit and are convertible into common stock on a one-for-one basis.

MTP Energy Management and Harvest Partners were the lead investors.

About $63 million of the proceeds will be used to buy an additional 5% interest in the Haynesville Joint Venture from an affiliate of GE Financial Services. Upon completion of the purchase, Regency's ownership interest will be 43%.

"Partnering with MTP Energy and Harvest Partners provides us with a creative and attractive approach to continue executing our growth strategy," said Byron Kelley, chairman, president and chief executive officer of Regency, in the release.

"We are increasing our ownership stake in the Haynesville Joint Venture, which enhances our strategic position in one of the most attractive drilling regions in the United States, and increases Regency's margins derived from fee-based assets," Kelley said.

"We are delighted to announce our investment in Regency, which greatly advances Harvest's long-term commitment to the energy sector," remarked Michael B. DeFlorio, senior managing director at Harvest Partners, in a separate release.

"Regency embodies our investment strategy focused on exceptionally-managed, fee-based midstream service providers participating in the most promising resource plays in the industry. We are also pleased to have the opportunity to partner with MTP Energy in this transaction and leverage MTP's energy investment expertise," DeFlorio said.

Regency could not be reached for further comment.

Regency's stock (Nasdaq: RGNC) gained 89 cents, or 5.78%, to $16.28. Market capitalization is $1.31 billion.

Regency Energy Partners is a Dallas-based natural gas and natural gas liquids company.

VirnetX wraps $6 million deal

VirnetX Holdings raised $6 million via a private placement of common stock and warrants, the company announced.

The Scotts Valley, Calif.-based company sold approximately 2.38 million shares at $2.52 per share. Investors also received 60-day series 3 warrants to purchase another $6 million worth of stock, also at $2.52.

In addition, the company issued five-year series 1 and series 2 warrants, exercisable at $3.93 and $0.01, respectively.

According to Greg Wood, head of communications at VirnetX, the company structured the deal so as to prevent investors from running the stock down.

"We went through this process in 2008 in a public offering," he explained. "What we experienced is people were driving the stock down."

As such, with the addition of the warrants, "there is incentive for investors to drive the price up."

"Basically they did this in a way that they could raise more capital as the stock appreciates," said a source familiar with the matter.

"We're very pleased with this funding," Wood added. "It's like the light at the end of the tunnel for us."

Wood said the funds will help the company in a number of ways, but, most importantly, it will help pay for ongoing litigation between VirnetX and Microsoft Corp.

VirnetX filed a patent infringement lawsuit against the computer giant in February 2007, Wood said. In February of this year, a markman hearing was held and on July 30, the company learned that the judge had sided in favor of VirnetX in at least nine out of 10 claims.

But throughout the legal process, there have been obstacles, the least of which is financing such a suit against one of the largest companies in the world.

"Potential licensees appear to be reluctant because they didn't want to be perceived to be funding litigation against Microsoft," Wood said, characterizing it as "poking a tiger with a sharp stick."

"So it was really important to get this funding because it helps take away that stigma," he added.

"So all in all, it's a very exciting day for us," Wood enthused. "We really got over that hurdle."

Once that stigma is gone, then the company can go about gaining more licensees for its Gabriel Connection technology, which allows people to communicate in a secure real-time connection. Wood said the company is getting ready to beta test the technology in the near future.

And, the future is only getting brighter, he noted.

"If VirnetX is allowed to mature, if we don't get taken out, VirnetX could really develop into one of the best companies around," he said. "We're kind of a company to keep your eye on."

"Obviously this is a positive thing for the company, to be able to raise funding to go ahead with the game plan," the market source added. And in his opinion, "I don't believe this company will ever need to do another financing again."

VirnetX's equity (Amex: VHC) fell 42 cents, or 13.25%, to $2.75. Market capitalization is $110 million.

Optare to raise £8.6 million

Optare, a Lancashire, England-based bus maker, arranged a £8.6 million private placement of ordinary stock.

The company intends to sell approximately 122.86 million shares at 7p per share.

The proceeds raised in the financing will allow the company to continue development on its range of low-carbon buses, among other things.

"I am delighted by the level of institutional support which endorses our strategy of developing our product range, focusing on new low carbon technologies and reducing cost over the next 12 to 18 months," said Jim Sumner, CEO, in a press release. "This investment is excellent news for customers, employees and suppliers and will assist the business in positioning itself strongly for 2011 when we expect markets to recover."

Optare's shares (London: OPE) closed at 7.25p. Market capitalization is £8.68 million.

Bonds.com closes first tranche

Bonds.com Group settled its first tranche of a $5 million private placement of units, according to a regulatory filing and subsequent press release.

The deal originally priced Aug. 28 and the company took in $1 million on Sept. 1. The remaining funds are expected to be raised in three or more closings within the next 90 days.

All told, the company will sell 5,000 units at $1,000 each. Each unit contains 2,667 common shares and 9,597 warrants. The warrants are exercisable for three years.

Also, if all 5,000 units are sold, warrants for an additional 26.89 million common shares will be issued.

Fund Holdings LLC is the investor.

Proceeds will be used for working capital and expansion of its sales force, among other things.

"Fund Holdings LLC's investment into Bonds.com demonstrates our strong belief that the fixed-income industry is at an inflection point regarding technology, regulation and the innovative business models that will be required to succeed in the new financial environment," said Edwin L. Knetzger, a managing member of Fund Holdings and Bonds.com's new chairman, in a press release.

"John Barry and the management team have created an organization and business model that has all the attributes to succeed in today's fixed-income environment. This investment represents our commitment and alignment to assist in realizing the execution of a timely and well defined strategic business plan."

Bonds.com's shares (OTCBB: BDCG) ended unchanged at $0.25. Market capitalization is $15.3 million.

Bonds.com Group is a Boca Raton, Fla.-based and provider of an online trading platform to institutional and individual fixed-income investors through subsidiary Bonds.com.

Shaw River eyes A$5 million

Australian Mineral explorer Shaw River Resources is looking to raise A$5 million from a private placement of equity, the company said.

The company will sell 33.33 million shares at A$0.15 per share. The deal will come in two tranches, with 24.5 million shares closing immediately and the remaining shares to be sold once shareholder approval is received.

"We are delighted by the strong support received for the placement, and by the confidence demonstrated by our shareholders in the company," remarked Vincent Algar, managing director, in a statement.

"The strength of interest in the placement ensures Shaw River remains well funded to execute its manganese exploration strategy. We are currently drilling at our flagship Baramine Manganese Project, and we are already well advanced in preparations for our next major drilling program at Baramine, which will commence in the fourth quarter of 2009," he said.

Shaw's stock (Australia: SRR) ended at A$0.175.

Shaw River Resources is based in West Perth, Western Australia.

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