RGS Energy aims to raise $5 million through public offering of stock, warrants

LOUISVILLE — RGS Energy’s stock (Nasdaq: RGSE) dropped 24 percent Friday after announcing a public offering of common stock and warrants that could raise as much as $5 million for the troubled Louisville-based installer of rooftop solar equipment.

RGS Energy’s stock was trading at $3.29 per share midday Friday, down from its closing price Thursday of $4.36.

This new offering of units consists of shares of common stock and warrants at $3.65 per unit and is expected to close June 30. After the company pays the placement agent fees and estimated offering expenses, the company expects to receive net proceeds of approximately $4.4 million.

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In May, RGS Energy was on the brink of being delisted from the Nasdaq stock exchange, but it carried out a 1-for-20 reverse stock split that increased its stock price to avoid delisting.

The last two years have been difficult for RGS. In March, the company said it was cutting 100 jobs, one-third of its workforce, as it reported a $57.1 million loss in 2014 compared with an $11.3 million loss in 2013.

In May, RGS reported a first-quarter net loss of $3.7 million and a 23 percent decline in revenue from the same period a year ago.

For this current offering, each unit consists of one share of Class A common stock and a warrant to purchase 0.3 share of Class A common stock at an exercise price of $4.20 per share. The warrants are exercisable beginning six months after issuance and for a period of five years after that.

On Thursday, RGS announced it had converted all of its subordinated debt to Class A common stock and entered into agreements to exchange a substantial amount of its Series A and C warrants for Class A common stock. Subordinated debt is debt which ranks after other debts if a company falls into liquidation or bankruptcy.

RGS converted outstanding principal of $3.15 million and accrued interest of $1.09 million under loans from Riverside Fund III LP, an affiliate of the company’s largest shareholder, Riverside Renewable Energy Investment, LLC into 1,288,156 shares of the company’s Class A common stock at $3.29 per share, the closing price on June 23.

“In addition to eliminating our subordinated debt and improving our working capital, the conversion of this debt held by Riverside, our largest shareholder and whose director is our chairman, demonstrates their confidence in our turn-around progress and plans,” said Dennis Lacey, president and chief executive of RGS Energy, in a prepared statement.

The company also has entered into agreements to exchange Series A and Series C warrants for an aggregate of 1,330,000 shares of Class A common stock. The exchange is subject to certain closing conditions, one of which is that subject to a review by the Nasdaq stock exchange.