Jones Act carrier Horizon Lines announced Monday that it has entered into a definitive agreement and secured commitments from holders of more than 99 percent of its 4.25 percent convertible senior notes due in 2012 that will allow the carrier to complete a $655 million refinancing of the firm's entire capital structure.
Horizon, which operates the largest domestic US ocean fleet, said "the modified agreement will completely recapitalize the company and eliminate the refinancing risk related to the maturity of the existing convertible notes and the existing bank debt in 2012. It also provides liquidity to fund continued operations through a new asset-based revolving loan (ABL) facility."
The note holders have also committed to provide Horizon with access to a $25 million bridge loan to serve as a liquidity cushion through the completion of the recapitalization.
Bondholders are being asked to swap the $330 million in existing 4.25 percent 2012 notes for $280 million in 6 percent convertible notes maturing five-and-a-half years from issuance, and $50 million in stock.
Horizon, which has been reeling from a government-sanctioned $15 million fine after pleading guilty to price-fixing in the Puerto Rico trade last March, missed a mid-August payment on its current notes and is operating within a 30-day grace period. Lenders had already altered covenants of the current credit facility twice this year and have declined further waivers or amendments.
The carrier said that assuming full participation in the exchange offer, holders of the 2012 convertible notes will own approximately 95 percent of the firm's stock on an as-converted basis following the exchange offer.
Horizon indicated that if participation of the bondholders in not realized, the firm would likely be compelled to "seek bankruptcy protection."
Additional components of the larger refinancing plan include: a commitment from 2012 note holders to purchase $225.0 million of new five-year 11 percent first-lien secured notes to be issued by a Horizon subsidiary, and a commitment by 2012 note holders to purchase $100 million of new five-year maturity second-lien 13 percent to 15 percent secured notes to be issued by a subsidiary. The $100 million amount includes the $25 million bridge loan.
Proceeds from the secured notes will be used, among other things, to satisfy in full Horizon's obligations outstanding under its existing first-lien revolving credit facility and term loan, which currently total $269.7 million.
The carrier expects to complete the exchange offer of the existing 2012 convertible notes by the end of September, at which time it expects to close the entire refinancing.
Tuesday, August 30, 2011
