Legal
Wildwood Casino

Plainfield Discounted Debt Sale Challenged by American Gaming Group Investors

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Investors in a Colorado casino are claiming they were cheated out of their equity control in a scheme involving Innovation Capital and the asset managers brought in to lend the company money during its start-up phase. The deal involved a $51 million senior secured credit facility funded by Guggenheim Partners and millions of subordinated debt funded by now defunct Plainfield Asset Management to build a gambling complex in Cripple Creek, Colo., called Wildwood Casino. A group of majority equity investors led by John Schaffer filed an arbitration claim against the casino manager, Joe Canfora of Merit Management, for contract violations after he bought the casino’s subordinated debt from Plainfield Asset Management (PFAM) at a deep discount without notifying other investors of the investment opportunity. Part of the PFAM loan structure involved warrants for class A shares that Canfora now owns. When executed the warrants give Canfora majority ownership over the initial investors.

Legal
Rich Anslow

Anslow & Jaclin Calls It Quits

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Anslow & Jaclin, the New Jersey law firm that was once one of the most active firms providing securities counsel to Chinese companies seeking to go public in the U.S. via reverse mergers, is dissolving after 20 years, according to partners Richard Anslow and Gregg Jaclin. The partners made announcement in private meetings with colleagues and clients attending the Rodman & Renshaw Global Investment Conference in New York from October 8-10. Each stressed the dissolution of the partnership was amicable and that both attorneys would remain active in securities practice for small cap companies. Anslow will be joining the New York-based firm Ellenoff, Grossman & Schole, while Jaclin is joining Lawrenceville, N.J.-based Szaferman, Lakind, Blumstein & Blader, effective October 1. In an interview, Rich Anslow said the decision to dissolve his partnership with Jaclin was a difficult one, but was necessitated by the precipitous decline in the Chinese reverse merger market.

Markets

Growth Equity Market in Transition as Autumn Deal Season Begins

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The emerging growth capital market rounds the corner into the fall deal season with overall robust deal flow masking major shifts in how and to whom capital is allocated. Increasing reliance on registered offerings of common stock priced at market is remaking the old PIPE market of “desperation financing” into a deep and efficient marketplace for issuers seeking strategic capital to fuel targeted corporate development programs.

At the close of August, the equity private placement (EPP) market had raised $29.15 billion in capital in registered and unregistered equity and equity-linked offerings in 2013. That’s a 5% increase over the same period in 2012. That respectable aggregate market growth overlays significant shifts in capital allocation by growth capital investors away from unregistered to registered offerings, led by the growth of at-the-market (ATM) and, surprisingly, old-fashioned rights offerings. Were it not for a 300% increase in ATM dollars raised, and 400% increase in rights offerings in the first eight months of the year compared to a year ago, the 2013 EPP market would be trailing 2012 activity by almost $10 billion.  ATM offerings increased from 80 programs raising $765.8 million a year ago to 108 programs that have raised $2.38 million so far this year, accounting for 8% of all capital raised in the EPP and PIPE markets this year.

Markets
ATM

ATM Deals Grow While Registered Directs and CMPOs Stagnate

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More than five years ago The Securities and Exchange Commission loosened rules on the ability of small growth companies to register shares on a shelf, triggering greater demand for registered direct deals. The financial crisis accelerated the trend as cautious investors sought to reduce the risk associated with restricted PIPE securities. Shifting strategies, hedge funds focused on buying instantly tradable registered shares, which later became available through overnight confidentially marketed public offerings (CMPOs). But use of the traditional registered direct vehicle and its newer CMPO variation has flattened over the last several quarters as companies have begun to increasingly gravitate toward at-the-market offerings (ATMs). The ATM structure, which also distributes registered shares from a shelf, generally provides a cheaper route to equity financing that’s frequently received more kindly by the market.