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.

On Friday, with the help of lawyers from Kilpatrick Stockton, Delta Air Lines is slated to close a $450 million deal that raises cash for the company by using 24 of its jets as collateral.

The airline launched the transaction on Tuesday, selling Class A pass-through trust certificates, which are similar to bonds, to underwriters including Goldman Sachs & Co. and Credit Suisse Securities. The underwriters then sell the certificates, primarily to institutional investors. Delta initially will hold the sale proceeds in escrow, according to documents on file with the Securities and Exchange Commission, then will use the pass-through trust to acquire a related series of enhanced equipment trust certificates, or EETCs, a specialized form of financing larger airlines use to fund the purchase of their jets. Delta will pay 6.2 percent for the financing, with a distribution date of 2018.

Delta will net $444.3 million from the deal, after the underwriting fee of $5.6 million is paid.

This is a repeat performance for the Kilpatrick team, led by partner W. Benjamin Barkley and including partner David M. Eaton and associates Adwoa M. Awotwi and Megan K. Callahan, who handled a similar transaction for Delta in November. That one was valued at $688.7 million and carried considerably higher interest rates on its two tranches—7.75 percent and 9.75 percent.

Barkley said he could not comment on the transaction because the DEAL is pending. Delta also was represented by lawyers from Debevoise & Plimpton, serving as the airline's chief finance counsel. Shearman & Sterling represented the underwriters, which, in addition to Goldman and Credit Suisse, are Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Banc of America Securities Inc.

In the current deal, Delta is financing two new Boeing jets the airline received in March, and refinancing 22 other aircraft, which Delta acquired about a decade ago. Those older planes were financed in 2000 under another EETC that matures in November. Because EETCs cannot be paid off early without complications, the proceeds from the current certificate sale will be held in a trust account until this fall, then used to pay off the older jets.

The deal is structured to enhance Delta's ability to market it to investors. As in its November deal, the pass-through trust structure allows investors to cede some duties to a trustee, who distributes interest payments to investors according to their ownership shares and makes decisions for the group about whether to foreclose on an aircraft in the event of default.

If there is a default, Natixis SA, the New York branch of a French investment bank, is serving as a liquidity backstop provider, which, according to Delta's preliminary prospectus supplement, means Natixis will make three semiannual interest payments on the debt if Delta cannot do so.

The financing is secured by jets with a total appraised value of about $839 million, providing a 54 percent loan-to-value ratio. The November deal's loan-to-value ratio, by contrast, was 61 percent—meaning investors in the current deal are getting a bit more security because the equity in the planes is higher, providing more downside protection in the event of the jets' depreciation or if Delta defaults and the planes need to be seized and sold.

That ratio could change if the airline decides it needs more money and issues Class B certificates—roughly equivalent to a second mortgage on the same set of planes—which is something SEC documents say the airline has the option to do.

The prospectus also lists risks associated with the investment, including the volatility of fuel costs; Delta's obligation to post collateral in connection with its fuel hedge contracts—in 2008, "our counterparties required us to fund $1.2 billion of fuel hedge margin," the airline notes in the filing; and Delta's ability to fully realize the expected benefits of its merger with Northwest, for which integration costs of $500 million over three years are anticipated.

Although Delta has packed on debt in recent months, an 8-K filed June 15 says Delta plans to start deleveraging. Citing $1 billion in cashflow from operations and $600 million in free cashflow in the quarter ended in March, the company noted that its unit revenues increased by 8 percent—the first increase since the fourth quarter of 2008.

Delta projected that it would cut its net debt, estimated to be $15 billion at the end of this year, to $10.2 billion by December 2012.

Equifax Inc., represented by Kilpatrick Stockton partner Gregory K. Cinnamon, has agreed to sell its Direct Marketing Services division to Alliance Data Systems for $117 million.

  The all-cash transaction, which Cinnamon said took between 45 and 60 days to put together from a legal standpoint, is expected to close around the beginning of July. 

“Equifax engaged a banker, Wells Fargo, and we ran an auction process for the transaction,” said Cinnamon, who has represented Equifax since 1995. He said Equifax’s general counsel, Kent Mast, along with the company’s  corporate and technology counsel, Jeffrey R. Thorpe, were integral in putting the deal together, as were some Equifax corporate development people. “They had a number of interested parties submit bids.”

Alliance Data, whose in-house attorneys, led by Jeanette Fitzgerald, handled this deal, submitted the winning bid. The Dallas, Texas-based company plans to integrate the about 200 employees it gets from Equifax into its Epsilon Targeting and Marketing Technology groups.

“This was an asset transaction, where [Equifax was] divesting their direct marketing relationship businesses that had been integrated over the years, so pulling that apart was probably the most complex part of the deal,” Cinnamon said. “For Equifax, it was no longer core to their differentiated data business, and for Alliance Data’s business, this was right down the middle of the fairway of what they do.”

Rural electric distribution cooperative GreyStone Power Corp. has inked a five-year, $600 million power purchase and scheduling agreement with Morgan Stanley Capital Group.

Attorneys from Schiff Hardin’s Washington office served as project counsel for Douglasville-based GreyStone, which is one of the largest members of Oglethorpe Power Corp. GreyStone supplies electricity to eight metro-Atlanta counties.

“Most of GreyStone’s power is provided by Oglethorpe, the generation and transmission cooperative,” said Sherry A. Quirk, one of the Schiff Hardin partners on the deal.

Morgan Stanley Capital Group, she added, fills GreyStone’s energy needs that are not met by Oglethorpe or that can be more economically met by another resource.

Thomas M. Ingoldsby, the other Schiff Hardin partner handling the transaction, said that Morgan Stanley Capital Group trades in the energy market, buying and selling power supplies. “Part of what they’re doing is they’re purchasing power that they’ll use to supply GreyStone’s needs,” she said.

GreyStone opened a competitive procurement process in January, seeking bids and negotiating agreements with potential power suppliers. “We did essentially simultaneous negotiations among three parties who developed final and best offers with respect to contract terms as well as price,” Quirk said.

The competition, Ingoldsby said, gave GreyStone more opportunity to negotiate and ultimately drove down the power purchase price.

Ingoldsby said that Morgan Stanley Capital Group was represented by lawyers from McDermott Will & Emery in Washington. He said he and Quirk consulted on Georgia law with lawyers from GreyStone’s usual local counsel at Tisinger Vance in Carrollton.

In an energy industry deal worth $304.2 million, McKenna Long & Aldridge lawyers have helped Canadian company Just Energy Income Fund acquire a privately held marketer of natural gas and electricity.

Just Energy, based in Toronto, acquired all of the equity of Hudson Parent Holdings and Hudson Energy Corp. on May 7, funding its acquisition via an agreement to sell convertible debentures with an aggregate principal amount of $330 million to a syndicate of underwriters led by RBC Capital Markets, GMP Securities and CIBC World Markets Inc. as joint bookrunners.

Hudson operates in New York, New Jersey, Illinois and Texas and serves midsize commercial customers.

The McKenna lawyers who worked on the deal are partners Ann-Marie McGaughey and David Brown, and associate Kristen Beystehner. The Hudson companies were represented by lawyers from Kirkland & Ellis in Chicago; the underwriters' counsel was from Gibson Dunn & Crutcher in Silicon Valley.

United Community Bank has done something a lot of financial institutions might envy: It has sold $103 million of non-performing mortgages and bank-owned properties to an investor at book value and set itself up for a continuing cash infusion from stock sales in the bargain.

One of UCB’s lawyers, James W. Stevens at Kilpatrick Stockton, referred to the complex deal as a “new, new thing … it’s a new form of transaction.”

He said UCB, which is owned by Blairsville-based United Community Banks Inc., the third-largest bank holding company in Georgia, has been a client of the firm’s for more than 20 years. The bank and its lawyers put together a multipart deal, first agreeing to sell about 25 percent of its non-performing assets—primarily residential and commercial loans and other real estate owned properties—to New York-based Fletcher International Inc., represented in this deal by the New York and Palo Alto, Calif., offices of Skadden Arps Slate Meagher & Flom.

“They sold the assets at book value,” Stevens said. “You can move anything if you want to sell at a deep discount … so selling at book value was a big plus for them.”

Another part of the deal was a stock purchase agreement, which gave Fletcher the right to buy $65 million of the holding company’s preferred convertible stock at $1,000 per share, according to an 8-K filed with the Securities and Exchange Commission. Fletcher also gets a warrant in connection with the asset sale allowing it to buy common-stock-equivalent junior preferred stock exercisable up to $30 million. An additional $35 million will be granted if all the preferred stock is purchased.

If Fletcher doesn’t buy all the preferred stock, which is convertible to common stock, by May 2011, it must pay UCB 5 percent of the amount it did not purchase and an additional 5 percent of any amount not purchased by May 2012, according to one of UCB’s 8-K filings.

Another aspect of the deal, according to the SEC filings, was that UCB loaned about $82.4 million of the purchase price, and Fletcher paid $20.6 million in cash. Fletcher also deposited another $18 million with the bank to pre-fund an estimated three years’ of interest, principal amortization and other costs.

“This was something that came together through, honestly, just the persistence and creativity of the officers at United Community Banks,” Stevens said, speaking of CEO Jimmy Tallent, CFO Rex S. Schuette and Chief Risk Officer David Shearrow.

The deal came together quickly. Stevens said discussions began last year, but most of the work was done in a four-to-six-week period this spring thanks to what he jokingly called 12-hour “half-days” of work for the Kilpatrick team, which included Atlanta partners Hilary P. “Hil” Jordan and Richard R. Cheatham, and partner W. Randy Eaddy in Winston-Salem.

The deal needed to move quickly, Stevens said, because the stock aspect requires shareholder approval, and this meant relevant information had to appear in UCB’s April 15 proxy statement to prepare shareholders to vote on May 26.

“There’s a potential issuance of common stock as a result of this transaction in excess of 20 percent of the existing common stock,” he said. If the shareholders don’t approve that potential issuance, he said, “The deal will be capped at 19.99 percent.”

King & Spalding lawyers have helped an affiliate of client GE Energy Financial Services close on a $150 million investment in a liquefied natural gas regasification terminal under construction in Pascagoula, Miss.

GE Energy Financial Services paid cash for its stake in Gulf LNG Holdings Group, which it purchased from Houston-based Crest Financial Limited, according to King & Spalding transactional partner Michael J. Egan. Crest was represented by attorneys from Locke Lord Bissell & Liddell's Houston office.

Gulf LNG is building the $1.1 billion liquefied natural gas terminal adjacent to the Bayou Casotte Ship Channel in the Port of Pascagoula, on the Gulf Coast. The facility, which is slated for completion in late 2011, is designed to receive, store and regasify imported LNG. According to information from GE Energy Financial Services, the project has 20-year service agreements with major oil and gas companies to supply LNG, and will connect to four transmission pipelines.

Egan said that because his client was buying into an existing project, the deal's challenges centered on "a very complex set of agreements relating to the financing and the various investors" in the complex, which is financed by a syndicate of lenders led by RBS Greenwich Capital.

"We really had to drill down into those documents and make sure GE understood the terms," he said. "There was no opportunity to recast or renegotiate those agreements relating to the financing of the venture. There are also some very important agreements relating to when the terminal is operational and commitments relating to the natural gas supply."

King & Spalding tax partner James H. Lokey Jr. said his team also had to assess the partnership agreement itself—GE Energy Financial Services bought 30 percent of the facility; El Paso Group, which is managing construction and will operate the facility, owns 50 percent; and the state oil company of Angola, Sonangol USA, owns 20 percent—and the tax basis increases and their effects on the purchase price. 

Other King & Spalding attorneys on the deal included Houston partner Daniel R. Rogers and Atlanta associates Robert J. Leclerc and Svetoslav S. Minkov.

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."

Jackson Healthcare, an Alpharetta-based health care staffing business, has purchased the pharmacy staffing unit of Duluth-based Hire Dynamics in a deal involving a cadre of local lawyers.

General Counsel Dennis Stockwell handled the transaction for Jackson Healthcare; Locke Lord Bissell & Liddell partner Philip A. Cooper represented Hire Dynamics.

Though financial terms of the deal were not disclosed, both companies made the most recent Inc. 5000 magazine listing of the fastest-growing private companies in the nation. According to the magazine, Jackson Healthcare posted 303 percent growth over three years to revenue of $372.6 million; Hire Dynamics had 30.4 percent growth over three years to $40.5 million.

Stockwell, through spokeswoman Meigan Manis, said the companies knew of one another because both operate in the same market. But, she said, they really came together when associates at Jackson Healthcare, who knew associates at Hire Dynamics, helped introduce their presidents.

Cooper, who has represented Hire Dynamics since its founding in 2001, said the deal took about a month to put together. "It was pretty fast track," he said.