Horizon Lines announces refinancing
Horizon Lines, the nation’s largest domestic container shipping company, said Friday it has entered into a definitive deal to refinance its debt with a group of noteholders who will become the majority shareholders of the company upon completion of the deal.
The deal was first announced in June and the company has been negotiating details this summer.
The holders of 99 percent of $330 million in 4.25 percent convertible senior notes that are due in 2012 have agreed to the transaction, under which they will provide Horizon with $655 million in new financing which will replace the company’s existing debt.
Under the deal, the holders of 99 percent of the company’s 2012 convertible notes have agreed to:
' Exchange their $330 million in senior notes for $280 million in new 6 percent convertible secured notes and $50 million shares of common stock, issued at $1 per share, which will represent 61.8 percent of the company’s capital stock after issuance. The note holders will also have the ability in the future to convert the new 6 percent secured notes into additional shares that would boost their ownership of up to 95 percent of the company’s stock.
' Purchase $225 million of new, five-year, first-lien notes with an interest rate of 11 percent.
' Purchase $100 million of new, five-year, second-lien notes with an interest rate of 13 percent to 15 percent. (Horizon also said certain note holders have agreed to provide the company with access to a $25 million bridge load that it said would act as a “liquidity cushion” and eventually be replaced with these second-lien notes.)
Horizon said it expects to complete the exchange offer of the existing 2012 convertible notes by the end of September.
The company detailed its offer to exchange the notes in a filing with the Securities and Exchange Commission.
It said it is making the exchange offer “in order to reduce our consolidated outstanding indebtedness and extend the maturities or our debt obligations.”
If the exchange offer was not competed and the company was unable to address its near-term liquidity “we would expect to seek relief under the U.S. Bankruptcy Code,” Horizon explained. “Holders of old notes would likely receive little or no consideration for their old notes.”
Horizon said reorganizing out of court would “enable us to continue operating our business without the negative impact that a bankruptcy could have on our relationships with our customers, employees, suppliers and others; reduce the risk of a potentially precipitous decline in our revenues in a bankruptcy; and allow us to complete our restructuring in less time and with less risk than any bankruptcy alternatives.”