Lime Rock PIPEs Up
Allis-Chalmers is latest public company to turn to private equity for help.
June 29, 2009
About a year ago, Allis-Chalmers Energy Inc. was doing great; the company’s shares were trading at $18 each. Since then, the company’s fortunes have been pronouncedly impacted by the recession, and Allis-Chalmers, worst off than most U.S. companies, dipped below (and, since then, rose above) the $1-per-share level. But the oil and gas exploration equipment company could not get by without taking an infusion from private equity — as listed companies increasingly have turned to private equity to become leading stakeholders.
Allis-Chalmers Energy announced Monday the closing of a private placement with Lime Rock Partners V that would give to the Connecticut-based PE shop 19.89 million shares, or, nearly 28% of the company, and will secure for the energy services support company about $39.5 million in funding. Lime Rock also agreed to buy Allis-Chalmers’ newly issued 7.0% convertible perpetual preferred stock as part of its funding offer; the sum of the transactions was an $86 million infusion into the listed entity.
Private equity has been visibly supporting listed companies looking for bargains at a time when their cash carries little influence in an already-tight debt market.
Earlier this month, the listed, Florida-based Office Depot raised $350 million from BC Partners, giving the European PE firm a 20% stake. In January, Warburg Pincus spent $175 million for a stake in Nuance Communications at about $10 per share; at press time, these shares appreciated about 25% since the date of the PE shop’s play.
Also, last November, Whole Foods sold $425 million worth of preferred stock — convertible into a 17% stake — to an affiliate of retail investment firm Leonard Green & Partners.
RBC Capital Markets served as Allis-Chalmers’ financial advisor for the rights offering, backstop commitment and private placement of convertible preferred stock.
The energy exploration equipment company needs the cash to pay off its debt, according to its statement.
“Allis-Chalmers intends to use the net proceeds of the rights offering and sale of common stock to Lime Rock to repay indebtedness outstanding under its bank credit facility and senior notes, and intends to use the net proceeds of the sale of convertible preferred stock to Lime Rock to repay indebtedness and for general corporate purposes,” the company said.
Calls were not returned in time for publication.
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