Velocity Express restructures senior secured notes due 2010; interest rate will rise to 18% from 12%

By Angela McDaniels

Tacoma, Wash., May 20 - Velocity Express Corp. said it successfully negotiated the restructuring of its senior secured notes due 2010 and, as a result, the interest payments due on June 30 and Dec. 30, 2008 and half of the interest payments due in 2009 may be paid in kind instead of cash.

Up to 50% of any paid-in-kind interest may be paid with common shares.

The noteholders also agreed to the replacement of existing financial covenants with new covenants through 2010, according to a company news release.

In connection with the agreement, noteholders will receive an additional $7.8 million principal amount of notes for a new total of $86 million principal amount outstanding.

Additionally, the following terms were put in place:

• The interest rate will increase to 18% from 12%;

• The exercise price of the warrants originally sold with the notes in July 2006 will be reduced to $1.35 per share from $1.45;

• The company will issue additional warrants to the noteholders equal to 15% of Velocity Express' common stock with a forced conversion feature at 150%;

• A portion or all cash proceeds from some events will be used to prepay the notes; and

• The noteholders will have the right to name two representatives on the board of directors.

The modified covenants will provide the company with the necessary resources to complete its operating turnaround and expansion of the business with minimal dilution to the ownership positions of current common and preferred equity holders, chairman and chief executive officer Vincent A. Wasik said in the release.

"Despite the challenges of the significant fuel cost increases and the impact of a slowing economy, the company was profitable in the months of March and April," Wasik said. "During the quarter, we completed our project to re-align driver settlements with prevailing market rates and we continued to renegotiate or exit from unfavorable, low margin legacy-CD&L contracts, including a number with uneconomic fuel indexing provisions."

"We appreciate the confidence our bondholders have expressed in our ability to finish the job we started with the CD&L merger and capture the substantial value we see in retail replenishment and health-care delivery services," he added.

Velocity Express is a regional delivery services provider based in Westport, Conn.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.