Noteholders to help Horizon reduce leverage

   Horizon Lines said it has an agreement with more than 96 percent of its noteholders to further de-leverage its balance sheet in connection with and contingent on a restructuring of the vessel charter obligations related to the company’s discontinued transpacific service.
   Stephen H. Fraser, president and chief executive officer, said “we believe these additional steps will solidly position the company for sustained investment in our business and improved profitability.”
   Following termination of its transpacific service Horizon discontinued the use of five non-Jones Act qualified container vessels that are subject to “hell or high water” charters under which the company’s obligations are absolute and unconditional. The aggregate annual charter hire for the vessels is about $32 million.
   Horizon said it has been exploring sub-charter opportunities for the vessels, and at the same time engaging in discussions regarding a restructuring of the charters to mitigate ongoing charter expense, lay-up costs, insurance expense and maintenance costs.
   Under the agreement with noteholders, substantially all of the remaining $228.4 million of Horizon’s 6 percent Series A and B convertible senior secured notes will be converted into 90 percent of the company’s stock, or warrants for non-U.S. citizens. The remaining 10 percent of the common stock would be available in connection with the restructuring of Horizon’s vessel obligations. To that end, the conversion of the convertible secured notes is contingent on a number of conditions, including the company’s restructuring of its charter obligations with respect to the vessels.
   Horizon said it expects the transactions, or certain legally binding interim steps required to complete these transactions, will be consummated prior to
the filing of its 2011 annual report with the Securities and Exchange Commission. It filed a request with the SEC seeking an extension in time to file that report and said it expects to issue the 10K and announce results for the 2011 fourth quarter on or before April 10.
   Horizon said on a continuing operations basis it expects to report an operating loss of $6.4 million and adjusted operating income of $5.5 million
on revenue of $264.3 million for the fiscal fourth-quarter, ended Dec. 25, 2011. This compares with a GAAP operating loss of $32.6 million and
adjusted operating income of $4.3 million on revenue of $256.1 million a year earlier. It noted that adjusted operating income for the 2011 fourth quarter excludes charges of $14 million for antitrust-related legal settlements and expenses, employee severance and equipment impairment charges, partially offset by a $2.1 million gain resulting from a reduction of the goodwill impairment charge recorded in the 2011 third quarter. In the 2010 fourth quarter, adjusting operating income excluded $36.9 million in charges for antitrust-related legal settlements and expenses, restructuring costs
related to a non-union workforce reduction, an equipment impairment charge, and costs for union employee severance.
   On a continuing operations basis, container volume in the fourth quarter of 2011 totaled 60,279 revenue loads, down 5.8 percent from 63,977 revenue loads for the fourth quarter of 2010, which contained an extra week. Excluding the additional week in 2010, container volume for the 2011 fourth quarter increased 0.2 percent from 60,133 loads a year ago on a comparable basis. Container rates, net of fuel surcharges, totaled $3,136 in the 2011 fourth quarter, compared with $3,124 for the same period a year ago. Fuel costs averaged $665 per metric ton in the 2011 fourth quarter, a 42.4 percent increase from $467 a year ago. — Chris Dupin