Government proposes to slash Horizon fine

Government proposes to slash Horizon fine    The U.S. Justice Department, which earlier this year fined Horizon Lines $45 million for participating in a price-fixing conspiracy with competitors in the U.S. mainland to Puerto Rico trade, is now seeking to reduce the fine to $15 million.
   “The requested modification is necessary to preserve defendant's continued viability and ability to pay restitution to victims of its criminal conduct,” the government told the U.S. District Court in Puerto Rico in a motion dated April 26. The government said Horizon, the nation’s largest operator of Jones Act container ships, supports the fine modification.
   “Because Horizon has been unable to obtain a waiver of the debt covenant to permit installment payments of the $45 million criminal fine imposed by the court, it is likely that, if the criminal fine is not reduced to bring defendant into compliance with the debt covenants of the indenture, the company will likely be forced to seek bankruptcy protection,” the Justice Department said.
   “A bankruptcy, especially if it resulted in a liquidation of the company, would jeopardize the government's ability to collect the outstanding balance of the company's criminal fine. Under these circumstances, a reduction of defendant's fine to $15 million is allowable,” under federal law,' Justice said.
   Even the $45 million fine that the government and Horizon agreed to in February and which the court approved in March was “far less than would result from the application of sentencing of sentencing guidelines,” the government had said back on March 9, saying those guidelines called for a fine in the range of $336 million to $672 million.
   In March, the government said a forensic accountant, Dale Zuehls of Consulting Sciences Inc., had undertaken a nearly two-year analysis and concluded the most Horizon could pay was $45 million.
   The government said the reduction was necessary in order to prevent Horizon’s potential default under a bond indenture it entered into in 2007 with Bank of New York Trust Co., the trustee for the holders of convertible notes issued by Horizon.
   Under the indenture, Horizon is in default if it fails within 60 calendar days to pay, bond or discharge any judgments or orders for the payment of money the total uninsured amount of which exceeds $15 million.
   Based on past experience and common practice, Horizon and an independent accounting expert retained by the United States believed Horizon would be able to obtain a waiver of this default from the note holders, the government said.
   But Horizon has been unable to obtain that waiver. “Inability to obtain a waiver from the note holders has become public knowledge as a result of a Securities and Exchange Commission Form 10K filing by defendant and has had a very negative impact on defendant's business and operations,” the Justice Department said.
   “If this negative impact is not quickly remedied, there is a significant risk that defendant could be forced to seek bankruptcy protection even before it is actually in default to the note holders under the indenture,” the Justice Department told the court this week. It added that upon request the parties would appear before the court “with more information regarding the negative impact that publication of defendant's potential default has had on its business.”
   On April 11, Horizon had made a filing with the SEC in which it said “the vast majority of its customers have indicated that they will continue to rely on the company for shipping services at the same levels as prior to the company's filing of its 2010 Form 10-K on March 28, which included a going concern modification to its unqualified audit opinion.”
   Horizon Lines said earlier this week it will release its first-quarter 2011 financial results before the stock market opens on Friday. ' Chris Dupin