American Commercial Lines Inc. (ACL) announced Tuesday it had entered into a restructuring support agreement (RSA) with entities that currently hold a substantial majority of the company’s term loan debt. Under the RSA, ACL’s term loan debt, which totals approximately $1 billion, will be converted to equity. In addition, certain of these term loan lenders will provide ACL with an additional $200 in capital to support liquidity and investments in the business. Once the restructuring is completed, these term loan lenders will own the vast majority of equity in a financially restructured ACL. The identities of the lenders were not disclosed.
ACL is one of the U.S.’s largest barge operators, with a fleet of 3,094 dry cargo barges, 406 liquid barges and 188 towboats.
Prepackaged bankruptcy filing
To implement the RSA, ACL indicated it plans to file a “prepackaged” bankruptcy package and reorganization plan under Chapter 11 of the U.S. Bankruptcy Code. The filing is expected to occur by the end of this week in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.
In addition to the conversion of nearly $1 billion in debt to equity and $200 million in new capital, ACL also indicated that the company had received a commitment for debtor-in-possession (DIP) financing consisting of a $640 million asset-based loan and a $50 million term loan from certain of its existing lenders.
Vendors will be paid
The company stressed that its operations would continue in a normal fashion during this court-supervised reorganization process. ACL also indicated that it intends to pay its vendors and suppliers in full under normal terms for goods and services provided on or after the filing date. The company stated that under the terms of the prepackaged plan and subject to court approval, general unsecured pre-petition claims also would be paid in full under the ordinary course of business.
While ACL’s current term loan lenders will control the vast majority of the company’s equity upon reorganization, sources indicate that California-based Platinum Equity will retain a small minority stake in the newly reorganized ACL. Platinum acquired ACL’s equity at the end of 2010 for approximately $432 million. The transaction also included $345 million in long-term debt, giving ACL a total enterprise value of $777 million at that time.
Major challenges
In a release announcing the reorganization, Mark Knoy, president and CEO of the company, stated that, “ACL has built a decades-long industry leadership position through key investments in our fleet and a relentless focus on safe and reliable operations. Like many others in our industry, over the last four years ACL has been affected by challenging market conditions, the weather and the closure of key areas of the river system for extended periods of time. We have responded to these challenges by reducing costs and maintaining a high degree of financial discipline. The actions we are now taking will significantly reduce our outstanding debt and the associated costs to service that debt, freeing up our available resources to be fully devoted to competing in today’s market.”
ACL’s heavy debt load has been hanging over the company like the sword of Damocles for the past several years. Like the rest of the industry, ACL’s fortunes have been whipsawed in the years after 2014, when the barge industry was earning heady profits. In the spirit of those times, ACL acquired most of the barge assets of AEP River Operations from American Electric Power in 2015 for approximately $550 million. Much of ACL’s current term loan debt dates from this period as it was used to help finance its acquisition of AEP barge assets and also to refinance previously incurred debt. This term loan debt, which now will be converted to equity, was scheduled to mature later this year.
