Horizon Lines completed a complicated $652.8 million refinancing that saves the largest U.S. domestic ocean carrier from bankruptcy and will leave bondholders with most of the company’s stock.
The carrier had struggled to straighten its finances since pleading guilty last March to price-fixing in the Puerto Rico trade. Horizon operates between the U.S. mainland and Puerto Rico, Alaska, Hawaii and Guam and from China to the U.S. West Coast.
"We now have a new capital structure that eliminates the refinancing uncertainty faced by our company over the past several months and better positions us for the future," said Stephen H. Fraser, Horizon’s president and CEO. "We have put in place a solid financial foundation that affords us the opportunity to grow our business and significantly reduce debt over time."
Under the refinancing, holders of 99.3 percent of the company’s 4.25 percent convertible notes due in 2012 will exchange their notes for a total of $278.1 million of new 6 percent convertible notes and $49.7 million in common stock and warrants. The newly issued notes are in two levels — 99.3 million that must be converted into common stock within the next nine months, and $178.8 million that the company may convert to common stock after a year.
The deal would leave bondholders with more than 61 percent of the company’s shares, a total that will rise to about 95 percent if all of the newly issued convertible notes are converted into stock.
In addition, holders of the company’s 4.25 senior convertible notes and other parties purchased $225 million of first-lien secured notes and $100 million of second-lien secured notes paying 13 to 15 percent interest and maturing in five years.
The company and its subsidiaries also entered a $100 million, asset-based credit facility arranged by Wells Fargo Capital Finance. The credit facility has a floating rate that initially will be 3.25 percent over LIBOR.
Proceeds from the first-lien notes and the second-lien notes satisfied the $266.4 million in principal, interest and fees that Horizon owed under its previous first-lien revolving credit facility and term loan.
Horizon had said that without the refinancing, it would have had to seek bankruptcy protection. In pleading guilty to a felony antitrust charge in the Puerto Rico case, Horizon accepted a $45 million fine that threatened to put the company in default of its debt covenants. The Justice Department later agreed to reduce the fine to $15 million, saying that was all Horizon could pay without jeopardizing its viability.
The company’s common stock closed Wednesday at 41 cents a share. It traded at $5.89 this year before the company announced its guilty plea.