Private placement volume takes a tumble; NRG Energy plans $400 million offering

By Ronda Fears and Sheri Kasprzak

Atlanta, Dec. 13 - Private placement volume was weak Monday - with one huge exception - despite a stronger stock market and higher oil prices.

"My only explanation is that it's a Monday and it just happens to be a sluggish day," said one market source. "Stocks are up today, so I don't think it's the market in general. I imagine volume will improve over the course of the week."

The Dow Jones Industrial Average gained 95.10 to close at 10,638.32, the Nasdaq was up 20.43 to end the day at 2,148.50 and the S&P 500 closed up 10.68 to 1,198.68.

Oil prices gained $0.10 Monday to end at $40.81 per barrel.

Volume hit a slump in Canada, as well, even though sources there could not point to a particular cause.

"Nothing in particular today that I can point to," said one Canadian source when asked about what might be pushing down volume. "I would say that if the price is right, people would buy on Christmas Day, only slightly tongue-in-cheek. There is more money than investments right now."

But there was one big private placement announced, although it was generating as much attention in the regular convertibles market.

NRG Energy Inc. said it planned to raise $400 million in a private placement of convertible perpetual preferreds.

The preferreds are talked with a 4.0% to 4.5% dividend and a 22% to 25% initial conversion premium via equal placement agents Deutsche Bank Securities and Citigroup Global Markets Inc.

The Section 4(2) offering, designated basically as a means of expediting the deal, is being made with registration rights so is expected to trade similar to a Rule 144A issue within a couple of days of closing the books, a market source said.

After a full day of book-building, including a "due diligence" conference call at 11 a.m. ET on Tuesday, the convertible is set to price after the market closes Tuesday.

The Minneapolis-based power generation firm said proceeds would be used to redeem a portion of its 8% senior secured second lien notes due 2013 and to enable NRG to use existing cash balances to repurchase 13 million shares of stock held by investment partnerships managed by MatlinPatterson Global Advisors LLC.

NRG issued the $1.25 billion of 8% senior secured second lien notes due 2013 (B2/B+) in December 2003 as it exited bankruptcy; in January 2004, a $503.5 million proceeds add-on to that issue was sold.

After the stock buyback from MatlinPatterson, the investment manager's stake in NRG will be reduced to a point where it will no longer have a position on the NRG board of directors, according to a market source familiar with the transactions pending from NRG.

NRG plans new bank facility

NRG also was in market with a $950 million credit facility (Ba3/BB) via joint lead arrangers Credit Suisse First Boston and Goldman Sachs, structured as a $450 million seven-year term B talked at Libor plus 250 basis points, a $350 million seven-year synthetic letter-of-credit facility talked at Libor plus 250 bps and a $150 million three-year revolver talked at Libor plus 275 bps with a 50 bps commitment fee.

The new credit facility proceeds are earmarked to refinance bank debt. It was already oversubscribed by Dec. 3, almost a week before the actual commitment deadline, with over $1.6 billion of commitments in the book. Over 80 people attended the Nov. 30 bank meeting that launched the deal into syndication in person and over 80 people attended via telephone, market sources said, so it was expected to be a blow out.

Pricing on the new credit facility, however, has not been firmly established as it is still in the syndication process.

National Lampoon's $8.2 million deal

National Lampoon Inc. announced Monday it raised $8.2 million in a private placement.

The company sold 229,761 units at $35.50 each. The units include one series C preferred share and one warrant to buy 10 post-split shares at $1.77 each for four years.

The company received $3 million in cash and $5.2 million from the conversion of debt, salary and accrued expenses in the deal.

"We believe that the successful completion of this transaction can be viewed as a vote of confidence in National Lampoon's business model and management team and reflects the confidence the investors group has in National Lampoon's strategic plan and in the company's ability to achieve its goals," said the company's chief operating officer Dan Laikin, in a statement.

Based in Los Angeles, National Lampoon is an entertainment company focused on feature films, television programming, home video, audio CDs and book publishing. The company plans to use the cash proceeds from the offering for working capital and general corporate purposes.

On Monday, the company's stock closed up $0.30 at $3.20.

Signature gets equity line

Signature Leisure Inc. got a standby equity distribution agreement for $5 million from Katalyst Capital Group Ltd.

Katalyst has committed to provide up to $5 million, which will be drawn upon at the company's discretion through the purchase of Signature's stock.

The company may request up to $250,000 in any six-day period in exchange for common stock.

"The funding arrangement with Katalyst Capital Group Ltd. will enable the company to have access to the capital that it needs to execute its business strategy," said Signature's chief executive officer Stephen Carnes in a statement. "I am pleased with the funding arrangement as it provides the company with access to capital in a manner that enables the company the flexibility to receive the funds at the company's sole discretion."

Maitland, Fla.-based Signature Leisure is a development-stage wholesale and retail used car company.

The company's stock closed down $0.0025 at $0.0145 Monday.

BP International raises $4 million

BP International Inc. raised $4 million from a credit facility from Laurus Master Fund Ltd., which includes $1 million in a secured convertible minimum borrowing note and $3 million in a secured revolving note.

The note and the revolving note both mature Dec. 2, 2007, bear interest at 9% yearly and are convertible into shares at $0.44 each.

Laurus also received a warrant to buy an additional 2 million shares at $0.66 for the first 1 million shares acquired and $0.71 for the remainder of the shares. The warrant expires Dec. 2, 2011.

"First, this funding venture will allow us to expand our marketing presence in our athletic division," said Larry Ball, BP's chief executive officer said in a statement. "Despite very limited resource, we have attracted high-caliber clients - including the Montreal Expos, Boston Red Sox, Houston Astros, New England Patriots, among many others - to our athletic line. This gives us the confidence to expect that a converted marketing effort will result in greatly enhanced sales and measurable growth in that division."

Deland, Fla.-based BP International manufactures fabric architecture shade structures and athletic field equipment. The company plans to use the financing to expand its marketing efforts in its athletic division.

On Monday, the company's stock closed down $0.03 at $0.48.

StockerYale closes deals

StockerYale Inc. wrapped up two private placements, the company announced Monday.

The first deal, for $1 million in secured convertible notes, was sold Dec. 8 to Laurus Master Fund Ltd. and another current institutional investor.

The three-year notes are convertible into common shares at $1.10 each and carry an interest rate of Prime plus 200 basis points.

Seven-year warrants for 100,000 common shares at $1.38 each, 66,000 shares at $1.60 each and 24,000 shares at $1.71 each.

On Monday, the company finished a private placement of 2,924,546 shares at $1.10 each for $3,217,000. The shares were sold to existing institutional shareholders and officers and directors of the company.

Those investors also received warrants to buy 731,137 shares at $1.38 each for five years.

StockYale, based in Salem, N.H., manufactures illustration components for machine vision systems, microscopes and industrial inspection systems. It plans to use the proceeds from the deals for working capital.

On Monday, the company's stock closed unchanged at $1.16.

Canadian offerings

Leader Capital Corp. led Canadian private placement action Monday with its plans to raise C$2.5 million in a private placement of shares.

The company plans to raise C$2 million in flow-through shares and C$500,000 in non flow-through shares.

Additional details about the new offering could not be obtained by press time Monday.

Leader, based in Toronto, is an investment firm. The company plans to use the proceeds from the C$2.5 million offering for working capital.

Leader's stock closed at $1.45 Dec. 10, its last trade.

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