Borders chairman invests $25 million; SkyPostal raises $2.26 million from convertibles issue

By Devika Patel

Knoxville, Tenn., May 21 - The week wrapped up with two companies announcing private placements alongside major board changes.

Most significantly, Borders Group Inc. announced a $24.98 million private placement of stock with investor Bennett S. LeBow, who has accepted a position on the company's board of directors and has also been elected chairman. The company recently replaced its chief executive officer in a bid to increase sales and revamp its brand.

Also, SkyPostal Networks, Inc. reported after the close Thursday that it sold $2.26 million in convertible notes. In the same filing, the company said four board members, including two committee chairmen, had resigned their posts.

China Broadband, Inc. announced a $10.53 million private placement of units, consisting of preferred and common stock, the proceeds of which will be used to acquire Sinotop Group Ltd. The company's stock (OTCBB: CBBD) fell 18.75% Friday, or 3 cents, closing the week at $0.13.

Borders board changes

Bookstore operator Borders secured $25 million to strengthen its balance sheet and help fund the planned transformation of the Ann Arbor, Mich., company's brand.

In the placement, the company is selling 11,111,111 common shares at $2.25 per share to an entity controlled by Bennett S. LeBow. Alongside this financing, the company announced that LeBow is joining Borders' board of directors and has been elected chairman. LeBow is the chairman of Vector Group, Ltd. Vector's president and chief executive officer, Howard Lorber, has also joined the board.

After disappointing holiday sales results (a 13.7% decrease compared with the same period in 2009), the company appointed an interim chief executive officer "with a strong commitment to revitalizing the Borders brand and a focus on driving traffic and profitable sales," according to then-board chairman Mick McGuire. Former executive vice president and chief merchandising officer Michael J. Edwards replaced president and chief executive Ron Marshall on Jan. 26.

Additionally, "in order to create the nine-member board as required" by the financing's terms, McGuire, the previous chairman, has resigned from the board, the company stated in a press release.

"I am pleased to welcome Ben aboard as the new chairman," McGuire said in the release. "Borders has made great progress in improving its financial and operating condition by exiting non-core businesses, reducing fixed costs, improving working capital efficiency and focusing on operational excellence.

"More recently," McGuire continued. "The executive team has begun the process of repositioning the business and in-store experience to succeed in a future of electronic delivery. This effort is supported by an exceptional group of directors who were selected for the board because of their expertise in the areas most critical to the company's success. By adding Ben and Howard to this already talented group, the company is now in the best possible position to achieve its full potential."

LeBow also will receive warrants for 35.13 million shares, which are exercisable at $2.25.

The company's shares (NYSE: BGP) rose 0.45%, or 1 cent, closing the week at $2.24.

SkyPostal sells $2.26 million

Miami's SkyPostal disclosed after Thursday's close that it had sold $2.26 million of its 3% senior secured convertible notes due May 19, 2013 in a private placement via agent Littlebanc Advisors, LLC.

The private placement note is initially convertible into common stock at $0.05 per share. Interest may be paid in kind and added to the note's principal until SkyPostal becomes cash flow positive. The notes are non-callable unless there is a liquidity event, in which case they may be redeemed at 200%.

LBI Investments, LLC, the investor, also received a warrant for 9.04 million shares, which is exercisable at $0.15 for three years.

Proceeds will be used to rollout merchant technologies that give online merchants the ability to accept international orders without taking on the inherent risks of cross-border shopping.

"We believe this financing will enable us to substantially accelerate our progress towards expanding our current consumer parcel business marketed under the PuntoMio brand to include a greater emphasis on merchant oriented e-commerce logistics," SkyPostal's SkyShop Logistics division president A.J. Hernandez said in a press release.

The company also said Florian Schuhbauer, Mathijs van Houweninge, Jose Misrahi and Christian Weber resigned as members of the board of directors. Misrahi was chairman of the audit committee, of which Schuhbauer was a member. Schuhbauer was chairman of the compensation committee, of which Misrahi and van Houweninge were members. Van Houwening and Schuhbauer were also members of the nominating and corporate governance committee. The company expects to appoint new committees at the next board meeting.

The international wholesale mail distribution company's shares (OTCBB: SKPN) were unchanged Friday, closing at $0.101.

China Broadband: $10.53 million

China Broadband said it will sell $10.53 million of its preferred and common stock units in a private placement. Proceeds will fund the purchase price of the company's planned acquisition of Sinotop Group.

Through this acquisition, the Boulder, Colo., cable broadband company aims to become the first national operator providing PPV and VOD services in China.

"We believe this is an opportunistic time to invest in China's premium programming and value added service offerings. The technological capabilities and high demand are paramount to the growing profitability of China's entertainment and media space," China Broadband's president Marc Urbach said in a press release.

"This transaction will allow us to work with some of the most prestigious and recognizable names in the industry, with access to a platform for thousands of movies, highly advanced distribution channels and unmatched technological development.

In the placement, the company will sell $3.5 million of series A preferred units, priced at $0.50 apiece, $2.4 million of series B preferred units at $0.50 apiece and $4.63 million in common stock units, which will be sold at $0.05 per unit.

Each series A unit consists of one series A preferred and one warrant for 34.2857 shares. Each series B unit consists of one series B preferred and one warrant for 10 shares. Each common stock unit consists of one common share and one warrant.

Each warrant is exercisable at $0.05 per share for five years.

Each preferred is convertible into 10 common shares.

Chardan Capital Markets LLC is the agent.

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