Horizon Offshore to offer 95% of equity in exchange for $85 million notes, preferreds

New York, April 1 - Horizon Offshore, Inc. said it has signed agreements for the second part of its recapitalization in which it will issue 95% of its equity in exchange for $85 million of subordinated notes and all its series A redeemable participating preferred stock.

The move follows completion of the first stage in which Horizon obtained $70 million of senior secured term loans, completed on March 31.

The new debt is structured as a $30 million senior secured term loan and a $40 million senior secured term loan. The $30 million loan carries interest at 15%, 10% in cash and 5% in kind. It will amortize by $500,000 per month and mature on March 31, 2007. The $40 million loan carries interest at 10%, 8% in cash and 2% in kind and also matures on March 31, 2007.

Proceeds will be used to repay Horizon's $25.6 million of borrowings outstanding on its revolving credit facility with CIT Group/Equipment Financing, Inc., make a $2 million prepayment on its term loan with CIT and pay $3 million of closing costs and fees. Remaining proceeds will be used for working capital and general corporate purposes.

On March 31, Horizon entered into a letter for the second stage of the recapitalization in which it will issue 60 million shares of common stock and a class of mandatorily convertible preferred stock in exchange for the $85 million of notes and the existing series A preferreds.

The new preferred stock will automatically convert when Horizon amends its certificate of incorporation to allow issuance of the extra shares. Until it converts, it will have a liquidation preference of $40 million.

On an as-converted basis, the stock to be issued and the convertibles will be equivalent to 95% of the outstanding common stock.

The new equity also covers payment to the noteholders for providing the new credit facility and amending the $25 million of subordinated notes that will remain outstanding to extend their maturity to March 2010 and reduce their interest rate to 8%, payable in kind.

Horizon said it also amended its term loan with CIT to extend the $15 million payment due in December 2005 to March 2006 and shorten the maturity from June 2006 to March 2006.

Thanks to the financing, Horizon expects to comply with its debt covenants until at least Dec. 31, 2005.

Horizon Offshore is a Houston-based provider of marine construction services.

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