Represented by Jones Day lawyers in Atlanta, Birch Communications has completed a private debt offering, generating $60 million in capital for the company, which provides voice and broadband communications to small and mid-sized business customers.

Jones Day partner John E. Zamer led the team, which also included associates Todd M. Roach, Sarah E. Watts and Jason Peterson.

Zamer explained that Birch, which has been a client for several years, is what’s known as a CLEC—competitive local exchange carrier—providing phone and data services primarily over the Internet. It has operations in 32 states, numerous subsidiaries, and operates in a highly regulated industry.

“Those created challenges in just doing a conventional term loan financing,” he said.

The $60 million was made up of a working capital facility provided by Silicon Valley Bank, represented by lawyers from Riemer & Braunstein in Boston, and senior secured term financing from lenders including PennantPark Investment Corp. and TICC Capital Corp., represented by Bingham McCutchen in Boston and Hartford, Conn.

Birch has announced plans to close on an additional $15 million in debt capital in the coming months.

The placement agent for Birch’s senior secured notes offering was Knight Libertas LLC. Redwood Capital Group acted as financial adviser to Birch in connection with the senior secured notes offering.

This deal essentially replaced a larger plan Birch had announced in November. At that time, the company said in a press release that it planned to issue $100 million in senior secured notes due in 2015. That deal, Zamer said, did not get done.

“That was a more widely distributed notes offering,” Zamer said, explaining that the current deal is a private placement to a placement agent with note buyers. “This is just a handful of term lenders, so the nature of the offering really changed. Most of this was to repay outstanding debt and the rest is for acquisitions. I suspect these lenders will have the ability to lend us more money in the future.”

Two locally connected firms, Jones Day and DLA Piper, snagged the top two spots in Thomson Reuters’ most recent Mergers & Acquisitions Review, which ranks legal advisers by number of deals completed worldwide this year.

Jones Day closed 165 deals in the first six months of the year, though that’s one fewer than the firm closed during the same period in 2009.

DLA Piper came in at 102 deals, 25 fewer than during the same period last year.

No other Atlanta-connected firms made the worldwide completed deals list, although Alston & Bird got a toehold on the bottom of a ranking of announced—as opposed to completed—U.S. deals. The firm came in 23rd of 25 firms on a list of most deals in which either the target or the acquirer was U.S.-based, handling 13 deals—14 fewer than last year. Despite the smaller volume, that ranking represented a leap up the ladder for Alston, which was ranked 41st in the same category in 2009. Jones Day ranked 10th on the same list, with 92 deals completed, nine fewer than last year.

The Thomson Reuters review also examines, among other things, the growth or decline of overall worldwide mergers and acquisitions. According to their analysis, the value of deals in the first half of 2010 totaled $1.1 trillion, a more than 9 percent increase from first half 2009 levels. The number of deals rose nearly 4 percent, with more than 19,000 announced.

Deals involving companies in emerging markets accounted for nearly one-third of the total value of transactions, with the energy and power industry the most active sector. Private equity M&A more than doubled, accounting for about 7 percent of the value of deals done.

Finally, the report looked at the biggest pending worldwide deals so far this year. Number five on that list was the announced union of The Coca-Cola Co. and Coca-Cola Enterprises North America, valued at $13.4 billion. Firms handling that deal are Skadden, Arps, Slate, Meagher & Flom, Cleary Gottlieb Steen & Hamilton and Wilson Sonsini Goodrich & Rosati for Coca-Cola; Cahill Gordon & Reindel for CCE. McKenna Long & Aldridge partners Clay C. Long, F.T. “Tread” Davis Jr. and David Brown are representing a special committee of CCE’s directors.

A new Thomson Reuters report which analyzes deal activity in the first quarter indicates that although the number and value of deals is rising, only a few Atlanta-connected firms are even claiming a spot on transactional league tables.

First, the (mostly) good news: The value of worldwide mergers and acquisitions activity between Jan. 1 and March 31 rose 21 percent over the same period in 2009, totaling $573.3 billion, according to the report. Deal value still declined about 5 percent, however, between the fourth quarter of 2009, which saw $602.5 billion in deals, and the first quarter of 2010.

The number of announced deals—more than 9,000—rose 4 percent compared with last year.

The busiest firms working on worldwide announced deals include No. 1-ranked Cleary Gottlieb Steen & Hamilton, with 26 deals valued at $114.8 billion. Jones Day is the only locally connected firm on the list, with 95 pending deals valued at $18.2 billion.

Cravath, Swaine & Moore ranked No. 1 on deals completed during the first quarter, handling 12 valued at $84.7 billion. Again, Jones Day was the only locally connected firm, coming in at No. 21 with 95 deals valued at $22.9 billion.

Atlanta-connected firms fared better on lists focusing on work done or pending in the Americas. Alston & Bird, DLA Piper, Jones Day, McKenna Long & Aldridge and Sidley Austin all made lists of firms involved in U.S. or Canadian deals, though none took a top spot in terms of deal value.

In the European rankings, Greenberg Traurig snagged the No. 2 spot among firms handling Spanish deals; DLA Piper, Hunton & Williams, Jones Day, McKenna and Sidley Austin also made the European rankings.

Jones Day made several lists of firms handling Asia-connected deals. The firm, along with DLA Piper and Sidley Austin, also landed on lists of firms handling deals in Japan, Australia and New Zealand.

You can view the full report at Thomson Reuters.

The consumer push for greener, safer plastics has prompted Eastman Chemical Co., with the help of its lawyers at Jones Day, to acquire a company that produces phthalate-free compounds that make plastic and other materials more flexible.

Jones Day partner William B. Rowland, who led the firm's legal team, said his client will close the all-cash deal to purchase Rosemont, Ill.-based Genovique Specialties Corp. as soon as it gets antitrust approval. "It could close as early as next month," he said.

Financial terms of the deal were not disclosed, but Genovique posted 2009 revenue of $135 million. Kingsport, Tenn.-based Eastman had sales of $5 billion last year. Genovique produces plasticizers, which help make plastics and other materials more flexible. Its plasticizers do not contain phthalates, compounds that have been linked to problems in the human endocrine system. The company also produces benzoic acid and sodium benzoate, antimicrobial products used to lengthen the shelf life of food, beverages and pharmaceuticals. Benzoic acid also is a key ingredient for benzoate plasticizers used to make PVC. Eastman already produces non-phthalate PVC.

The deal itself moved quickly, Rowland said, taking about four months to reach the definitive agreement stage. "It was an auction process," he said. "The target is owned by a private equity group called Arsenal Capital, and they had hired Lazard, an investment banking firm, to conduct an auction for this portfolio company."

Rowland said he didn't know how many other bidders were interested in Genovique, which also has operations in China and Estonia. That's typical in an auction put on by a private equity company, he said, where, after some due diligence, the seller asks for indicative offers and eventually narrows the field of potential bidders.

"You don't know what other people offered or who the other bidders are precisely, though you may get a sense from your industry contacts," Rowland said. "The sellers always want you to think that there are 20 bidders who are hot and heavy."

Genovique sits squarely in a growing market. Regulatory changes and consumer demand, according to information from Eastman, are likely to increase the volume of non-phthalate plasticizers at a compounded annual rate of 7 percent over the next five years in North America and Europe.

Rowland, who has done a number of acquisitions and dispositions for Eastman Chemical over the years, said that in addition to negotiations and mergers and acquisitions work, his firm also looked into environmental, antitrust, real estate and tax matters on the deal, as well as at the legal aspects of purchasing a company from a fund rather than a corporate owner.

Other Atlanta Jones Day lawyers on the deal include partners Michael A. Lee and John E. Zamer, of counsel Charles A. Perry and Christine M. Morgan and associates Heith D. Rodman and Justin R. Hitchcock.

Attorneys from Proskauer Rose represented both Genovique and New York-based Arsenal.

In a deal that may signal the shape of things to come in the power industry, Miller & Martin lawyers in Atlanta have helped Texas-based electricity marketer Nations Power set up a first-of-its-kind pre-paid power agreement with a major energy wholesaler.

From the companies' perspective, said Miller & Martin members A. Josef DeLisle and Chris Schwab, the deal is unique because getting customers to pay in advance for their electricity reduces the financial risk to the energy marketer and wholesaler. Under a traditional financial model, the companies essentially float the consumer a month's worth of power before sending a bill—which the consumer may or may not pay.

"The wheels fall off of that particular model in an economy like this, when people can't afford to pay their bills," said Schwab, who also worked on the deal with member Kenneth F. Antley and associate Christopher T. Henderson. "People can't afford deposits, and marketers won't enter into a normal billing cycle with someone who can't put down a deposit."

From the consumers' perspective, DeLisle and Schwab said, the transaction is also useful because it offers customers with low incomes or poor credit who can't afford high up-front deposits the option of skipping the deposit and pre-paying for their power.

"It's very interesting when it comes to the legal transaction, as well, because it's not something the traditional powerbrokers are used to seeing. They're used to seeing large deposits in order to, in essence, give you financing to purchase power," Schwab said. "The collateral of Nations Power increases directly with every pre-paid customer because the cash is in the bank before the customer ever buys the power."

Texas has a deregulated electricity market, DeLisle and Schwab explained, comparable to Georgia's deregulated gas market in which Atlanta Gas Light is the wholesaler of gas, owning all the pipes and infrastructure to produce and transport it. Customers are able to select from a variety of marketers such as Gas South or Scana, which purchase the gas from Atlanta Gas Light, then sell it to consumers.

Houston-based Nations Power, a startup launched about 1 ½ years ago that had no customers when the deal was signed, according to Schwab, is that kind of marketer for the Texas electrical market. Its wholesale partner in this transaction, which DeLisle asked not to be named, is a top 10 company in its industry and was represented by Jones Day and its in-house counsel.

"You don't generally get top-10 energy companies to get in bed with someone who has zero dollars on day one, but they see the value, and their credit risk is reduced because of the way this is set up," Schwab said.

DeLisle said the wholesaler's willingness to ink an agreement with Nations Power was enough to satisfy state regulators of his client's viability. "It's difficult for [Nations Power] to garner on their own behalf the creditworthiness … so what they did is essentially partner with this global energy business to provide the credit backing to satisfy the regulators," he said.

Schwab explained that the deal was built around an International Swaps and Derivatives Association agreement. "That's a universally standard form, and then there's a host of standards and schedules that go along with it that you can customize," he said.

One of the interesting and unusual aspects of the deal, DeLisle and Schwab said, was creating a cash flow system that protected the creditors yet left funds—which, because they are pre-paid, still belong to the customer until they're used to pay for real-time power use—still accessible to the consumer.

In the end, Schwab said, the lawyers created something akin to an escrow account for pre-paid funds, plus a system that lets money automatically flow from that account as it is used to pay for power into other accounts owned by the marketer and wholesaler. "Eventually," he said, "there's a cash basin at the bottom for our client to have its operating money and its profits."

The deal's value, the lawyers said, is unclear because it rises with each customer Nations Power signs up, and it is too early to say how many that will be. Texas has about a million "smart meters"—which provide for remote tracking of power and are necessary for the pre-paid system to work—and expects to have about six million in the next few years, so the potential is significant.

"There was a great deal of negotiating, a good deal of drafting," Schwab said. "I think everyone was excited by this, including the power provider, because it was novel and they could see it being a model in the future in the gas and water industries."

Jones Day partner Maria F. Farall of Atlanta was one of a team of attorneys advising NII Holdings Inc. in a $1.44 billion cash agreement with Grupo Televisa, S.A.B., the largest media company in the Spanish-speaking world.

At issue was a Mexican operating subsidiary for Reston, Va.-based NII Holdings known as Nextel Mexico.

Grupo Televisa, represented by lawyers from Wachtell, Lipton, Rosen & Katz, will acquire a 30 percent equity stake in NII's group. According to NII's 8-K filing with the SEC, the equity stake “reflects an implied pre-investment value of Nextel Mexico of $4.3 billion.”

The Mexican firm Gallástegui y Lozano, S.C., represented both companies on the Mexican aspects of the deal.

Farall, who worked with lead lawyer Jeanne M. Rickert out of Jones Day's Cleveland office, declined to comment on the transaction.

Televisa will receive an option to acquire an additional 7.5 percent equity interest in Nextel Mexico exercisable on either the third or fourth anniversary of the initial investment. Beginning on the third and each successive anniversary of the deal, according to NII's Securities and Exchange Commission filing, Televisa also will have liquidity put rights that, if exercised, will require NII to purchase up to 33.3 percent of Televisa's initial interest in Nextel Mexico. In general, a liquidity put right is used by an investor as a sort of guarantee of return on its investment. These liquidity put rights, for example, could give Nextel Mexico the incentive to cash Televisa out at some point or to go public.

Televisa also will gain the right to appoint two of Nextel Mexico's six board members.

The investment agreement is conditioned upon, among other things, the Nextel/Televisa consortium being awarded licenses to use specified amounts of spectrum in Mexico's upcoming auctions of its wireless spectrum. As of late last week, 17 bidders had filed documentation to participate in the May 25 auctions, according to an article in the Wall Street Journal.

NII's filings with the SEC indicate that Televisa's initial investment will be $1.14 billion, with the remaining $300 million paid in three equal installments on the first, second and third anniversaries of closing. Televisa's stake in Nextel Mexico will increase from an initial level of 25.3 percent to 30 percent as the installments are paid.

The companies have said that Nextel Mexico's wireless capabilities and Televisa's programming, content and multiple distribution channels, as well as its satellite and cable TV businesses, will combine to allow them to offer services including wireless, television, broadband data and fixed voice services.

The corporate intelligence service mergermarket has released its 2009 edition of Deal Drivers North America, an analysis of deal activity last year.

According to the report, produced in association with Merrill Datasite, North American M&A activity saw a 24.7 percent decline in volume and fell 7.6 percent in value. More than 3,000 deals were announced in 2009, with a combined value of $763.4 billion, compared with just over 4,000 deals with a value of $826.1 billion in 2008.

The deals mergermarket analyzed are valued at more than $5 million; if value was not disclosed, the turnover of the target was at least $10 million.

The most active deal sectors, as mergermarket defines them, were life sciences and health care, which accounted for nearly one-quarter of aggregate deal value, and energy, which posted almost one-fifth of aggregate deal value.

The report also includes a “Heat Chart,” which uses companies-for-sale stories written in the second half of 2009 as a barometer for deal activity this year. The South, which mergermarket defines as covering 12 states and the District of Columbia, posted the highest increase in for-sale stories. The sectors likely to be most active include technology, media and telecoms and energy, mining, oil and gas.

Legal advisers with Georgia offices, ranked from 1 to 20 by deal volume, include Jones Day (1) and DLA Piper (5).

Lawyers from Jones Day and Sutherland worked on a transaction to help Atlanta-based Spectrum Brands Inc. unite with small-appliance-maker Russell Hobbs Inc. in a stock-for-stock deal.

The deal will create a new entity that retains the Spectrum name and is estimated to form a combined company with revenues of about $3 billion.

Jones Day attorneys, led by New York partner Robert A. Profusek and including Atlanta associates William J. Zawrotny and Brendon K. Durkin, represented a special committee of Spectrum's board of directors. Sutherland partner Mark D. Kaufman was lead counsel to Spectrum.

Spectrum and its special committee had different lawyers to avoid conflicts of interest because both Spectrum and Miramar, Fla.-based Russell Hobbs are connected to the same investor, Harbinger Capital Partners.

“The company that owned 100 percent of Russell Hobbs owned 40 percent of Spectrum, so they're getting paid on both sides of the transaction, in essence,” Kaufman said, explaining why the special committee and company had separate counsel.

“They're getting the value for Russell Hobbs and for their Spectrum shares, and they might have an interest different from everybody else.”

Spectrum, which is known for brands such as Rayovac batteries and Remington shavers, is a public company. Russell Hobbs, whose brands include Black & Decker, George Foreman and Farberware, is private.

“In these situations, you typically get a special committee to represent the interests of the public shareholders,” Kaufman said.

The all-stock transaction assesses Spectrum at an enterprise value—equity plus debt—of $2.6 billion, which translates into $965 million net of debt. It equates to $31.50 per share net of Spectrum's outstanding indebtedness.

Russell Hobbs is assessed at an enterprise value of $675 million, or $661 million net of debt.

The deal “provides a de-levered capital structure and longer-term financing,” Kaufman said.

The plan is to refinance Spectrum's secured term debt and asset-based lending facility. According to documents Spectrum filed with the Securities and Exchange Commission, the companies have received commitments from Credit Suisse, Bank of America and Deutsche Bank for about $1.8 billion in financing. The banks will refinance a portion of the existing senior debt of both Spectrum and Russell Hobbs through a combination of new term loans, new senior notes and a new $300 million asset-based lending revolving credit facility. The new term loans and notes are expected to mature in 2016 and 2017, respectively; the current term loans were set to mature in 2012.

The deal is expected to close this summer. If it does, to further reduce the combined company's leverage, Harbinger has agreed to convert its existing $158 million in aggregate principal of Russell Hobbs' term debt and about $207 million of its preferred stock into common stock of the combined company at a price of $31.50 per share. Harbinger then would own almost 64 percent of the combined entity.

Before the deal can close, it must survive a 45-day “go shop” provision that gives the special committee and its financial advisers a chance to seek other proposals.

Kaufman said his firm has represented Spectrum for about a dozen years. Zawrotny, who said he worked on negotiations and contractual matters, said this is the first time Jones Day has represented an entity connected to Spectrum.

This agreement comes just six months after Spectrum and its affiliated companies exited a Chapter 11 reorganization filed in U.S. Bankruptcy Court for the Western District of Texas, when the company was saddled with $4.4 billion in debt. The company emerged from Chapter 11 in late August, having eliminated $840 million in subordinated debt and closed on a $242 million exit financing facility. Latham & Watkins represented Spectrum in the bankruptcy; Skadden, Arps, Slate, Meagher & Flom along with Vinson & Elkins represented various Spectrum affiliates in the reorganization.

Other Atlanta-based Sutherland lawyers on the Spectrum-Russell Hobbs deal included partners David A. Zimmerman and Eric R. Fenichel, along with associates Jennifer D. Lambert and Brian M. Murphy on corporate matters; and partners Reginald J. Clark on taxes and Alice Murtos on employee benefits issues. Lawyers from Richards Layton & Finger in Wilmington, Del., also represented Spectrum. Russell Hobbs' legal team was from Paul, Weiss, Rifkind, Wharton & Garrison.

On the financial side, Barclays Capital Inc. advised Spectrum's special committee, and Credit Suisse advised Spectrum Brands.

Bankrupt Mesa Air Group Inc. wants to keep Jones Day as its outside lawyers, according to an application Mesa filed with the U.S. Bankruptcy Court for the Southern District of New York.

Jones Day, according to the filing, represents Mesa in a wide range of pre-petition litigation against Delta Air Lines and United Airlines Inc. In the past year, the firm has billed Mesa nearly $1.7 million for its services.

The filing lists the primary Jones Day lawyers expected to work on the litigation, along with their hourly rates. Among them are four Atlanta lawyers: partners G. Lee Garrett Jr. ($675) and David M. Monde ($625); and associates Robert A. Schmoll ($400) and Jason Burnette ($325).

According to the filing, Jones Day represents the beleaguered airline in four separate legal actions in three states.

Three of those suits were initiated in 2008 in U.S. District Court for the Northern District of Georgia. In one, Mesa and its subsidiary, Freedom Airlines, sued Delta seeking to enjoin Delta's termination of a jet operation agreement. The court issued a preliminary injunction in favor of Mesa, which was upheld by the 11th U.S. Circuit Court of Appeals. The parties now are awaiting a trial date in the district court. In another suit, Mesa and Freedom allege that Delta wrongfully terminated another agreement and are seeking $40 million in damages. The third Georgia suit involves Delta's allegation that Mesa and Freedom breached a “most favored nation” contract provision. In that case, the file of which is sealed, the court has not ruled on Mesa's motion to dismiss.

Mesa also sued Delta in August in federal court in Arizona over the termination of an engine maintenance agreement and Delta's allegedly unauthorized retention of seven aircraft engines. Delta filed a mechanics' lien on the engines and a counterclaim seeking to foreclose on the liens, but the court found that Delta had forfeited its lien claims. Delta has filed a notice of appeal to the 9th U.S. Circuit Court of Appeals; Mesa has a pending motion for summary judgment.

And United, in October, sued Mesa over the parties' code-sharing agreement about the in-service dates for certain aircraft in federal court in Illinois. The suit is pending.

Mesa's bankruptcy court filing seeking to retain Jones Day in these and related actions notes that Mesa's success in restructuring turns on the outcome of these suits, because 96 percent of its passenger revenues for fiscal year 2009 were derived from code-share revenue guarantee agreements with Delta, United and US Airways. “Accordingly, preserving or defending these relationships, and related rights and claims, will be a critical component of the Debtors' overall restructuring in these cases,” the application notes.

Mesa and 10 subsidiaries petitioned for Chapter 11 reorganization on Jan. 5, citing assets of $975 million and liabilities of $869 million. The suit is In re: Mesa Air Group Inc., No. 10-10018.

Two Atlanta lawyers recently helped their clients—one based in China and the other based here—ink a lease agreement on nearly 14,000 square feet of space in Atlantic Station.

Jones Day lawyer R. Mason Cargill assisted business incubator Chinamex in establishing a U.S. subsidiary and negotiating a 7-year, 10-month lease to house its new North American headquarters here. The lease was signed in mid-December, with Philip G. Skinner of Arnall Golden Gregory representing Atlantic Station.

Chinamex, a private Beijing-based company which helps other Chinese firms expand overseas, is the brainchild of parent company Chinamex Middle East Investment and Trade Promotion Centre, which already has established other business outposts in Amsterdam, Netherlands, and Dubai, United Arab Emirates.

Cargill said that Atlanta, thanks to good marketing and lots of personal attention from the Metro Atlanta Chamber of Commerce, won out over San Francisco as the incubator's U.S. headquarters. Chinamex, he said, plans to exhibit products manufactured by companies in the Hubei Province and its capital city, Wuhan, which has a population of about 10 million and is about an hour by air from Shanghai. Chinamex also will offer consulting and temporary office space and will help Chinese companies that want to deal more directly with the U.S. market to set up operations here, primarily for marketing their products.

Cargill and Skinner both said that U.S. leases are longer and more complex than leases in China, which meant that Chinamex officials had a lot of questions about the provisions and that negotiations took a bit longer than they might have with a U.S. tenant. Also, Skinner said, leases for mixed-use projects like Atlantic Station are by nature more complex than for free-standing office buildings because they involve covenants governing how a project can be developed and used and who pays for services that are used by the whole project.

Although Atlanta has been courting Chinese business for some time—Cargill was part of a prospecting trip to China, along with then-Mayor Shirley Franklin and the Metro Chamber in 2006—East-West business hasn't yet taken off in a big way here. The Atlanta-Journal Constitution reported that four much-promoted Chinese investment projects announced in the past three years have yet to come to fruition. These stalled projects include Kingwasong LLC's plans to produce soy sauce in Newnan and construction equipment manufacturer Sany Heavy Industry Co.'s plans for a $30 million investment in Peachtree City.

Still, Cargill—who spent several years in his firm's Shanghai office—said he thinks business relations will someday blossom between Atlanta and China. Developments are slow now because of the economy, he said, and because Chinese companies don't have the same incentives that Japanese companies had to set up operations here—namely, a cheaper work force than was available at home.

Still, he said, “I'm very optimistic. … I think it may be a slow process. A gradual process, but I think it'll happen.”