Horizon Lines has completed transactions that reduce the company’s net debt by $188.4 million and terminate obligations for five idle ships chartered for the carrier’s discontinued trans-Pacific service.
The company converted $228.4 million of its Series A and Series B convertible senior secured notes into stock or warrants equivalent to 83.5 percent of the company’s common stock.
Subsidiaries of Ship Finance International are releasing Horizon from its charter obligations for ships in the trans-Pacific service Horizon ended last fall. In exchange, SFI will receive $40 million in second lien senior secured notes due 2016, plus warrants equivalent to 10 percent of Horizon’s stock.
Terminating the charter obligations will save Horizon $32 million a year through 2018 and $4.8 million in 2019, as well as vessel layup costs of $3 million a year if the ships stay idle.
Existing holders will retain 6.5 percent of company stock. This includes 1.4 percent for existing stockholders and 5.1 percent for note holders who received stocks or warrants in a refinancing last October and as part of a debt-to-equity conversion in January.
The company reserved an additional 7.5 million authorized but unissued shares for future management incentive programs.
The transactions will cut Horizon’s debt by $188.4 million, with the $228.4 million in conversion of Series A and B debt partly offset by the $40 million in new debt to SFI. The company’s total funded debt outstanding will drop to $404.4 million from $592.8 million.
“These transactions successfully close a chapter in the history of Horizon Lines that we have been working diligently to complete for these past many months,” said Interim President and CEO Stephen H. Fraser.
Michael T. Avara, executive vice president and chief financial officer, said the deleveraging “greatly improves the company’s cash flow and liquidity, allowing for greater financial flexibility and stability.”
Horizon also said it is reducing its board size to seven from 11. Chairman Alex Mandl is retiring from the board and will be succeeded by board member Jeffrey A. Brodsky. Also leaving the board are William J. Flynn, Bobby J. Griffin and Carol B. Hallett. Fraser remains interim president and CEO until a new CEO is named.