Horizon Lines said it is trying to refinance its debt to avoid an expected default and would not comment on a Bloomberg News report quoting unnamed sources as saying the largest U.S. domestic ocean carrier may file for bankruptcy as soon as April.
Horizon's stock price plunged another 26 percent to 94 cents a share in early trading today. It dropped nearly 22 percent Wednesday and 48 percent Tuesday following the company's regulatory disclosures. The stock traded as high as $6.09 in the last year.
Bloomberg quoted sources as saying the company may seek to swap its debt for equity to avoid bankruptcy. Horizon CEO Stephen Fraser said this week the company was reviewing all options for refinancing and financial restructuring but he would not elaborate.
Gordon Forsyth, a Horizon spokesman, said the company "does not comment on speculation. While we are engaged in constructive discussions to refinance our debt and strengthen our financial position, we are maintaining our focus on operational excellence, customer service and safety. It is business as usual at Horizon Lines."
Horizon said in its annual report this week that it failed to win bondholder approval to waive a default following a $45 million fine for price-fixing in the Puerto Rico trade between 2002 and 2008.
The company's regulatory filing said the bond default would trigger a default of Horizon's senior credit facility and that if the default couldn't be averted, the company may be forced to seek bankruptcy protection.
Horizon's filing said the company expects to be in default on its convertible notes during the second quarter and to default on terms of its senior credit facility in the third quarter.
Legg Mason and Western Asset Management own about 85 percent of Horizon's $330 million in 4.25 percent convertible notes due August 2012, Bloomberg reported. Those notes dropped to 80 cents on the dollar from 91.1 cents on March 28, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
In a telephone interview this week, Fraser said Horizon is considering all refinancing options but has no plans to sell any of its container liner services as part of the restructuring. "We consider our liner services to be core to our business," said Fraser, 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.
Fraser said Horizon's financial difficulties won't affect the company's service or day-to-day operations. "This is not a solvency-of-business issue," he said. "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.
Along with its debt, Horizon said it is being hit by fuel prices that can't be immediately covered by surcharges, and by trans-Pacific spot rates that have dropped 25 percent in recent weeks due to what Fraser said was price-cutting by larger carriers entering the annual negotiating season for eastbound service contracts.
Horizon launched its China-to-U.S. service in December as an extension of the company's westbound domestic service from the West Coast to Guam. Horizon took over the service after the end of an agreement under which Maersk Line had chartered Horizon's eastbound capacity under a take-or-pay contract.
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