Boston Private offers details of $75 million financing, stock dips; Firepond may get $2 million

By Devika Patel

Knoxville, Tenn., Aug. 12 - Boston Private Financial Holdings, Inc. shares dipped 5.5% on Tuesday after the firm disclosed late Monday more details of its previously announced $75 million private placement of convertible preferreds with Carlyle Group.

Shares of Boston Private gave up (Nasdaq: BPFH) 49 cents on Tuesday to close at $8.90.

Meanwhile, Firepond, Inc. said it could raise up to $2 million through a private placement of common stock with its largest shareholder.

Boston Private: $75 million

Boston Private filed an 8-K Monday with the Securities and Exchange Commission that clarified the exact amounts of convertible preferred stock the company will sell to Carlyle Group. The deal priced July 22 for $75 million.

The company's senior vice president of corporate communications, Catharine Sheehan, told Prospect News that the Boston-based financial services company is raising funds for its banking subsidiaries and for general business purposes.

"The deal will help many of our affiliates. Some of them need access to capital," Sheehan said. "The current environment has led us to arrange this placing, which will provide some of the subsidiaries with growth opportunities."

Sheehan was mirroring similar comments made by Boston Private chairman and chief executive officer Timothy Vaill in the July 22 news release announcing the transaction.

"Carlyle's investment, combined with our own internal and external reviews, make us confident that we are addressing the current and foreseeable future capital needs of our affiliates. As a result, we can move aggressively to put the Southern California credit problems behind us," Vaill said in the release.

"In addition, while the current environment presents certain challenges, it is also creating positive growth opportunities for our strong-performing affiliates. This capital raise also ensures that we will have sufficient capital to allow them to pursue those growth opportunities where appropriate."

The "credit problems" and "challenges" to which he referred are undoubtedly due to the credit crisis, which recently was faced by the company's Los Angeles-based affiliate, First Private Bank & Trust.

Vaill spoke of that crisis in an April 23 release detailing the company's first-quarter progress.

"During the quarter," he said, "our private banking affiliates experienced the impact of the credit challenges faced by the whole banking industry due to declines in market values, particularly in the economically challenged Southern California and Southern Florida markets. At First Private, the increase in provision is related almost entirely to the bank's construction and land development loan portfolio and was primarily due to the rapidly declining values of real estate securing loans in the Inland Empire."

In the Carlyle placement, the company announced Monday it will issue 350.33077 series A non-cumulative mandatorily convertible preferred shares and 400.81221 series B non-cumulative perpetual contingent convertible preferred shares.

The holders of preferred stock have preferential dividend and liquidation rights over the holders of Boston Private's common stock.

Stock sale, dividend cut eyed

The transaction is part of a plan to raise $185 million in new equity capital. The company will also offer $85 million of common stock in a public sale and cut its dividend to $0.01 per quarter, which will increase retained equity by $25 million over eight quarters.

The mandatory tranche will account for 9.99% of Boston Private's pro forma equity when converted. It will convert at a price of $5.52 per share following a shareholders' meeting planned for later in the year.

The conversion price was based on the average closing price of Boston Private common stock during the week of July 7.

The contingent tranche will, combined with the mandatory piece, bring the total to 19% of Boston Private's pro forma shares. It will also convert at $5.52.

Both preferreds will pass through dividends on the common stock on an as-converted basis.

Carlyle will also receive two warrants for every five shares that would be issued on conversion. The warrants are exercisable for five years at $6.62, a 20% premium to Carlyle's stock purchase price.

Firepond attempts $2 million

Newton, Mass.-based Firepond has arranged a private placement of shares for up to $2 million and settled the initial $500,000 tranche.

The company has already sold 357,143 common shares at $1.40 apiece to its largest shareholder, FP Tech. FP Tech has the option to buy up to $1.5 million more of the shares until June 30, 2009.

"This transaction represents a vote of confidence and our largest shareholder's and our senior creditors' continued recognition of the underlying value of Firepond," company president L. Bradlee Sheafe said in a press release. "Now that we are in a better financial position, we are poised to move forward with confidence that Firepond will continue to hold its leading position in the on-demand configuration, pricing and quoting marketplace ... Firepond is proud of its legacy as the pioneer in this market and excited about a future founded on a tremendous product, firm financial footing and the expansion of its loyal customer base."

If FP Tech invests the full $2 million, Firepond says it may extend the maturity of its senior debt for an additional year, through June and December 2010. The company's senior secured creditors would then also have the option of receiving payment or converting their debt at $2 per share.

The company sells sales-management software. Its shares (OTCBB: FPND) were unchanged Tuesday, closing at $0.45.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.