Friday, September 18, 2009

Notable financing - Vitran PIPE (VTNC)

AlphaNinja - Right after I write a post about share offerings and how they're used, I find an interesting one from trucking company Vitran, who announced a PIPE (private investment in public equity) yesterday afternoon. It's pretty dilutive and a substantial discount to yesterday's close, but along with the share sale the company sees relaxed debt covenants - a plus for shareholders.

"TORONTO, Sept. 17 /PRNewswire-FirstCall/ - Vitran Corporation Inc. (NASDAQ: VTNC, TSX: VTN) ("Vitran" or the "Company"), a North American transportation and logistics firm, today announced that it has agreed to sell approximately 2.7 million shares of common stock at a price of US$8.50 per share to certain qualified investors (the "Offering"). The net proceeds to the Company, after payment of costs and expenses associated with the Offering, are expected to be approximately US$21.4 million. From these net proceeds, the Company intends to permanently reduce the outstanding amount of its syndicated term debt by US$7.5 million. The remainder of the net proceeds will be used to pay down revolving debt. The repayment of the revolving debt will increase the Company's unused debt capacity and give the Company added flexibility to execute its operating and capital initiatives."

I'm pretty sure the bankers here are Stifel Nicolaus. There are ibanks who make their entire living off of PIPES - hugely expensive "last-resort" financings for companies with no other funding options. Look at the terms above - the commission from this deal is nearly 10%!!! A diverse group of investors took part in this offering of 2.7million shares, which would be 77days worth of this stock's average trading volume. Sometimes the only way you make money with a company like this is through the discount afforded in a PIPE transaction.

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