Horizon Lines has no plans to sell any of its container liner services as it seeks to restructure its finances to avoid an expected default on its debt this year, the company's chief executive said.
"We consider our liner services to be core to our business," said interim CEO Stephen H. Fraser, a Horizon board member named interim successor to longtime CEO Chuck Raymond, who retired this month.
Horizon operates Jones Act domestic services between the U.S. mainland and Puerto Rico, Hawaii, Alaska and Guam, and last December launched an international route from China to the West Coast.
Horizon's recent decision to sell its money-losing Horizon Logistics unit was a strategic move based on the conclusion that third-party logistics wasn't a core business for the company, Fraser said in a telephone interview.
Horizon is "looking at a variety of creative options" on refinancing and financial restructuring in hope of avoiding a debt default, Fraser said, but he declined to discuss specifics.
The company said in its annual report this week that it expects to default on its senior convertible notes and senior credit facility. It said it had reclassified those debts as current liabilities on its balance sheet.
He also said Horizon's financial difficulties won't affect the company's service or day-to-day operations. The company's stock price fell another 21.6 percent on heavy volume Tuesday after dropping nearly 48 percent Monday
"We are operating with adequate liquidity," he said. "Our underlying business remains strong. We are not changing our service levels or the way we operate our business and have served our customers for more than 50 years.
"This is not a solvency-of-business issue. This has to do with how we are able to manage our debt and manage our operating performance as it relates to fuel prices and trans-Pacific revenue per box," Fraser said.
Fraser said Horizon is being hit by fuel prices that surcharges can't be adjusted quickly enough to fully cover, and by trans-Pacific spot rates that have dropped 25 percent in recent weeks because of what he said was price-cutting by larger carriers.
The current softness in trans-Pacific rates makes it unclear where prices will settle as carriers enter the height of the annual negotiating season for eastbound contracts, Fraser said.
-- Contact Joseph Bonney at firstname.lastname@example.org.