Horizon Lines said it closed on a bridge loan of up to $25 million to ensure liquidity while the carrier works to wrap up a planned $655 million refinancing by the end of September.
The loan was provided by holders of $330 million in 4.25 percent convertible notes that Horizon is seeking to swap for new debt and equity under a refinancing announced last month. Horizon said bank lenders had agreed to amend the company’s current credit facility to accommodate the bridge loan.
Horizon also said it has made the $7 million semi-annual interest payment on the convertible notes. The interest payment was originally due on Aug. 15, but the company exercised a 30-day grace period for payment.
The company operates the largest U.S. domestic ocean fleet and a China-to-U.S. service. It has been working on a financial restructuring since pleading guilty last March to price-fixing in the Puerto Rico trade. The fallout from Horizon’s guilty plea and $45 million fine, later reduced to $15 million, threatened to put the company in default of bond covenants.
Horizon said last month that more than 99 percent of bondholders had committed to exchange their 4.25 percent convertible notes for $280 million in newly issued 65 percent convertible notes and $50 million in stock.
The deal would leave bondholders with 61.8 percent of the company’s shares, a total that will rise to 95 percent if all of the newly issued convertible notes are later converted into stock.
"We very much appreciate the support of both our note holders and lender group as we proceed with a transaction that will culminate in the comprehensive refinancing of the company's capital structure," said Michael T. Avara, executive vice president and chief financial officer.
"Our refinancing remains on schedule and the new bridge loan, when combined with existing revolver availability, provides us with more than $35 million of liquidity to bridge the company to the closing of the refinancing,” Avara said.
When the refinancing is closed, the $25 million bridge loan will be exchanged for debt included in $100 million of newly issued second-lien notes that will carry interest rates of 13 to 15 percent.