Horizon Lines Successfully Amends Credit Agreement
Horizon Lines, Inc. (NYSE: HRZ) today announced that it has entered into a credit agreement amendment with its lender group, effective March 9, 2011, providing the company with additional flexibility as it moves forward with its overall debt refinancing efforts.
The amendment waives a default under the senior credit facility that would have arisen from the $45 million fine that the company has agreed to pay to settle the Department of Justice investigation, upon acceptance of the Plea Agreement by the United States District Court for the District of Puerto Rico. The amendment also adjusts the two financial covenants of the credit facility, providing relief from potential noncompliance under those covenants.
"We very much appreciate the support of our lender group and recognize that the amended credit agreement is a vote of confidence in the future of our company," said Michael T. Avara, Executive Vice President and Chief Financial Officer. “This amendment allows Horizon Lines to effect the Plea Agreement with the Department of Justice without triggering a judgment default under the credit facility, and it provides additional financial covenant flexibility as we pursue a comprehensive refinancing of our existing capital structure.”
As consideration for the amendment and waiver, Horizon Lines has agreed to a pricing increase of 2.50% per annum under the credit facility, an amendment fee of $0.5 million, as well as a reduction in the letter of credit commitment from $50 million to $20 million and in the swingline commitment from $20 million to $5 million. Horizon Lines also has agreed to other changes in the credit facility, including, but not limited to, an agreement not to issue a dividend, and certain reporting obligations. A copy of the credit agreement amendment is included as an exhibit to a current report on Form 8-K that Horizon Lines is filing with the SEC on March 11, 2011.
“This credit agreement amendment represents another significant step towards a comprehensive refinancing of our capital structure,” said Charles. G. Raymond, Chairman, President and Chief Executive Officer. “It is the fruition of much hard work and I commend both our lender group and the Horizon management team for their collaboration in delivering this amendment in a timely manner.”
Stephen H. Fraser, incoming President and Chief Executive Officer, stated: “Together with our advisors, we expect to soon commence broader constructive refinancing discussions. We are confident that these discussions will result in a financially stronger company that is better-positioned for the long-term. We anticipate completing the refinancing process in the second or third quarter of 2011.”
Source: Horizon Lines