FARMINGTON HILLS, Mich., March 19 /PRNewswire-FirstCall/ -- SEMCO ENERGY,
Inc. (NYSE: SEN) today announced the private placement of up to $50 million of
convertible preference shares (the "Securities") to K-1 GHM, LLLP ("K-1"), an
affiliate of private equity firm k1 Ventures Limited. The Securities are
convertible into shares of the Company's common stock at a conversion price of
$6.6257 per share. Non-cash dividends will accrue initially at a rate of 6%
for three years then increase annually by 1% to a maximum rate of 10%. The
Securities are perpetual preference shares. If converted, the Securities
would represent approximately 7.5 million shares, or 21%, of the Company's
outstanding common stock. In addition, the Company issued to K-1 detachable
warrants to purchase 905,565 additional common shares at an exercise price of
The Company will use the net proceeds from the private placement to repay
existing indebtedness, reflecting the Company's continued focus on
strengthening its balance sheet and improving its credit ratings.
The Company will issue the Securities in two tranches. The issuance of
the initial tranche, representing a face amount of approximately $31 million,
occurred today. The issuance of the remaining securities must be approved by
the shareholders of the Company and are required to be issued no later than
June 30, 2004.
In conjunction with the transaction, K-1 will have the right to nominate
two members to the Company's board of directors, or to appoint at least 22% of
its members, whichever is greater.
"This transaction represents the next step in the Company's ongoing
efforts to improve its credit quality and to increase book equity. Along with
other previously announced strategic actions, the Company is committed to
focusing on its gas distribution businesses," said George A. Schreiber, Jr.,
President and Chief Executive Officer of SEMCO Energy, Inc. "Further, K-1's
investment is a much needed equity capital infusion which will greatly assist
the Company's efforts to meet operating and financial goals."
k1 Chairman and CEO Mr. Steven Green stated that "k1 is pleased to have
the opportunity to invest in SEMCO. We are optimistic that under the
leadership of SEMCO's new President and Chief Executive Officer, Mr. George A.
Schreiber, Jr., that SEMCO will have a bright and profitable future."
Credit Suisse First Boston acted as the Company's exclusive placement
agent of the Securities.
This announcement is neither an offer to sell nor a solicitation of an
offer to buy any of these securities and shall not constitute an offer,
solicitation or sale in any jurisdiction in which such offer, solicitation or
sale is unlawful.
SEMCO ENERGY, Inc. is a diversified energy and infrastructure company that
distributes natural gas to approximately 391,000 customers in Michigan and
Alaska. It owns and operates businesses involved in natural gas pipeline
construction services, propane distribution and intrastate pipelines and
natural gas storage in several regions in the United States. In addition,
SEMCO provides information technology, specializing in serving mid-sized
companies in various sectors.
k1 Ventures Limited invests in a wide range of investments across diverse
sectors. k1 Ventures Limited is domiciled in the Republic of Singapore and is
listed on the Singapore Exchange Securities Trading Limited (the Singapore
Stock Exchange). K-1 GHM, LLLP is an affiliate of k1 Ventures Limited.
The following is a "Safe Harbor" statement under the Private Securities
Litigation Reform Act of 1995. This release contains forward-looking
statements that involve risks and uncertainties. Statements that are not
historic facts, including statements about the Company's outlook, beliefs,
plans, goals and expectations, are forward-looking statements. Factors that
may impact forward-looking statements include, but are not limited to, the
effects of weather, the economic climate, competition, commodity prices,
changing conditions in the capital markets, regulatory approval processes,
success in obtaining new business, the Company's ability to implement its
strategic, operational and financial initiatives, management performance and
other risks detailed from time to time in the Company's Securities and
Exchange Commission filings.
SOURCE SEMCO ENERGY, Inc.