Horizon in deal with Puerto Rico shippers

Horizon in deal with Puerto Rico shippers Horizon Line said it has entered into an agreement Thursday to settle outstanding class action litigation related to ocean shipping services in the Puerto Rico trade lane.
   Plaintiffs in the class action suit alleged price-fixing in violation of the Sherman Act and Puerto Rican antitrust laws.
   In May three former Horizon Lines employees were given prison sentences and fined for what the U.S. Justice Department described as an antitrust conspiracy involving goods moving between the U.S. mainland and Puerto Rico. Two Sea Star executives have also been jailed and fined in related charges.
   Horizon said the class action agreement is subject to the approval of the U.S. District Court for the District of Puerto Rico, and that it had the right to terminate the agreement under certain circumstances.
   Horizon has agreed to pay $20 million into an escrow account and certain base-rate freezes. It said $5 million would be paid within five business days following execution of the agreement and submission of a motion for preliminary approval to the court; $5 million within 90 days after preliminary approval of the agreement by the court; and $10 million within five business days after final approval of the agreement by the court.
   The base-rate freeze component of the agreement provides that class members who have contracts in the Puerto Rico trade with the Horizon as of the effective date of the settlement would have the option, in lieu of receiving cash, to have their 'base rates' frozen for a period of two years from the expiration of the contract in effect on the effective date of the settlement. All class members would be eligible to share in the $20 million cash component, but only contract customers would be eligible to elect the base-rate freeze in lieu of receiving cash.
   Horizon has said it received a grand jury subpoena and search warrant from the U.S. District Court for the Middle District of Florida seeking information regarding an investigation by the Antitrust Division of the U.S. Justice Department into possible antitrust violations in the domestic ocean shipping business, including Puerto Rico. Horizon Lines said it is cooperating with the Antitrust Division in that investigation. It also noted several class action lawsuits have also been filed against Horizon Lines relating to ocean shipping services in the Hawaii and Guam, and Alaska trade lanes. The carrier said it intends to vigorously defend itself against those lawsuits.
   The company also said it had reached an agreement with its lenders to amend the existing credit agreement in conjunction with the Puerto Rico settlement.
   'We appreciate the support of our lender group in the amendment process that provided the clarity and flexibility necessary to effect this settlement,' said Mike Avara, Horizon's senior vice president and chief financial officer.
   He said cost of debt on the company’s $150 million revolving loan balance and $115.6 million term loan outstanding as of June 1 has increased by 1.5 percent by that “our revised blended total cost of debt remains fairly low at 4.47 percent, up from the previous 3.81 percent. The 4.25 percent interest rate on our convertible notes remains unchanged. We have worked closely with our banks and expect to remain in compliance with our financial covenants.'