Horizon Lines reaches agreements for conversion of 6% senior notes

By Caroline Salls

Pittsburgh, March 28 - Horizon Lines, Inc. and some of its wholly owned subsidiaries have entered into restructuring support agreements with holders of more than 96% of its 11% first-lien secured notes due 2016, 13% to 15% second-lien secured notes due 2016 and 6% series A convertible senior secured notes, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

The agreement is designed to further deleverage the company's balance sheet in connection with and contingent upon a restructuring of the vessel charter obligations related to its discontinued trans-Pacific service.

Under the restructuring agreements, substantially all of the remaining convertible senior secured notes will be converted into 90% of the company's stock, or warrants for non-U.S. citizens.

The remaining 10% of the company's common stock would be available in connection with the restructuring of Horizon's vessel obligations.

To that end, the company said the conversion of the convertible secured notes is contingent on a number of conditions, including the restructuring of the vessel charter obligations.

"We greatly appreciate the support of our noteholders to help facilitate this potential restructuring to reduce the company's indebtedness, and also thank our employees for their continued dedication and hard work," Horizon Lines president and chief executive officer Stephen H. Fraser said in a company news release.

"Over the past year, Horizon Lines has taken a number of actions to restructure our business, reduce debt and improve liquidity.

"We believe these additional steps will solidly position the company for sustained investment in our business and improved profitability," he added.

The noteholders that executed the restructuring agreements have agreed not to transfer their notes before the occurrence of a termination event, which would terminate the agreements unless the transferee agrees to the terms of the restructuring.

Horizon Lines said that termination events include a breach by the company of its restructuring agreement obligations, the occurrence of an event of default on the notes or the specified charters, the occurrence of any material changes or waivers to some of the company's financing documents which are not satisfactory to a majority of the consenting noteholders and the failure to restructure the charter obligations by April 5.

The restructuring agreements terminate automatically on April 30.

10-K delayed

In addition, Horizon Lines said it will seek an extension from the Securities and Exchange Commission for the filing of its 2011 10-K.

The company said it needs more time to complete the review and analysis of its financial statements because of the fourth-quarter financial restructuring and discontinuance of its FSX trans-Pacific service.

According to the release, Horizon Lines expects to issue its fourth-quarter financial results in conjunction with the 10-K filing by April 10.

Horizon Lines is a Charlotte, N.C.-based ocean shipping and integrated logistics company.

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