TSAS "Kodiak Capital infuses $100 million into PGI Energy Fund Series 1 2010 following $15 million injection into C$ cMoney
Premium content from Houston Business Journal - by Casey Wooten, Reporter
Date: Sunday, May 9, 2010, 11:00pm CDT - Last Modified: Thursday, May 6, 2010, 3:41pm CDT
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A New York investment firm has made a second foray into the Houston market in less than a month.
Kodiak Capital Group LLC closed a deal on April 23 to invest $100 million in PGI Energy Fund Series 1 2010 Inc., a Houston-based energy fund.
Earlier in April, Kodiak Capital made a $15 million investment in C$ cMoney Inc., a Houston-based cell phone technology start-up company.
PGI Energy will use the $100 million to acquire and manage upstream and midstream oil and gas assets in the United States.
Marcellous McZeal, CEO, says PGI Energy already has contracts for oil and gas refineries in Wyoming and Kentucky, with similar deals in the works across the nation.
Having contracts in place made PGI Energy particularly attractive says Ryan Hodson, managing director at Kodiak Capital.
“For us it’s all about the deal flow, they were able to provide us with 10 different opportunities that they had lined up,” says Hodson.
McZeal says PGI Energy will target revenue-producing assets that have come under financial distress, snapping them up at discount prices.
“One refinery we have our eye on, they received a bridge loan to make some repairs, but the bank ended up taking the property back,” says McZeal. “It was revenue producing and the assets exceeded the value of the loan, so it is a prime target for takeover.”
McZeal, an oil and gas litigator with Houston-based boutique firm McGuire Grealish & McZeal LLP, has come across numerous owners in similar financial situations in his litigation practice.
“I’ve gotten a lot of calls where natural gas producers and oil well owners were heavily leveraged and needed counsel,” he says.
McZeal and other founders set up PGI Energy to take advantage of the current market conditions and go after overly leveraged properties.
“We put together a plan of attack and acquisition,” he says. “Some of these owners have been more than happy to find someone to help them out of their situations. So you examine them, turn them upside down and shake them, then you determine whether or not it makes sense to invest.”
PGI Energy currently operates out of a small Houston office, but McZeal says the firm has plans to lease space or acquire a building near Greenway Plaza or in the Galleria area once more acquisitions close over the next few months.
He says staff at the firm will grow to nearly 40 as PGI Energy takes on people to manage the acquired assets.
PGI Energy has also filed an S-1 application with the U.S. Securities and Exchange Commission to take the company public, but the initial offer has yet to be approved by the federal agency.
Funding teamwork
Kodiak Capital’s early April funding infusion of $15 million into cell phone technology start-up C$ cMoney was instrumental in drawing PGI Energy to the New York firm, according to Hodson.
Houston-based Pythagoras Group arranged financing on the PGI Energy deal, and Robert Gandy, an investment banker with Pythagoras, worked on both transactions (see “Dialing for dollars,” April 9).
The $100 million investment in PGI Energy is the largest so far for Kodiak Capital, which was formed in 2009.
The fledgling firm has given out $250 million to companies in the biotech, defense, energy and communications industries in North America and Australia.
Right now, Hodson sees a ripe market for teamwork among diverse funds such as Kodiak Capital and focused funds such as PGI Energy.
“We’re a special situations fund, as a result we look at all ways to diversify our asset base, and one is to take the funds-of-funds approach,” says Hodson.
He says PGI Energy’s expertise in the oil and gas industries can put Kodiak’s capital to more efficient use than a direct investment in target assets.
Says Hodson: “After finishing our research, the proof was in the pudding. They had already identified their target acquisitions that they were to use our capital to invest in.”
Read more: Kodiak Capital infuses $100 million into PGI Energy Fund Series 1 2010 following $15 million injection into C$ cMoney | Houston Business Journal "
