Celadon’s turnaround after an accounting scandal has taken two additional steps, with the company moving closer to finalizing new funding and with a New York investment firm becoming the company’s single largest shareholder, at least for now.
The move toward a refinancing of the company was signaled by the company earlier this month, so the news of it came as a follow-up with details.
The new funding comes in several different parts. Existing bankers Wells Fargo and Bank of America are providing $100 million in an asset-based revolving credit facility, or ABL. Celadon, a full service trucking and logistics company that describes itself as the largest NAFTA carrier, has financial relationships with Wells Fargo and BOA already.
The bigger part, a $200 million term loan that would be used to retire some existing borrowings, would be made by a lender that as of now is unidentified. In its release, Celadon described the lender as “a sophisticated investment firm that has a good appreciation for the trucking industry.”
That financial arrangement would also come with the issuance of new equity to an amount equal to 19.5% of existing outstanding shares, which stand at 28 million. The as-yet unidentified lender would receive those shares.
The ABL, the $20 million term loan and the new equity are expected to close by the end of the quarter, Celadon said in its statement: “During this time, we will have the resources and liquidity we need to continue to provide excellent customer service and support our professional truck drivers and employees, while capitalizing on the robust freight environment."
Celadon said it also has renegotiated existing lines of credit that would be refinanced as part of the larger $300 million deal. It also extended and re-amortized some tractor leases.
Thom Albrecht, the company’s CFO, told Freightwaves that he believes the new funding should end any discussion that Celadon might not survive.
The accounting scandal has driven the company’s stock from the New York Stock Exchange, as Celadon has yet to file numerous required reports with the Securities & Exchange Commission. It has said that its earnings statements back to 2014 could not be trusted. Its shares were moved off the NYSE to the OTC Pink Sheets, where it sunk to as low as $1.40. But with the announcement Monday, the stock kicked off the day at $1.56 and rose to as high as $2.12 before falling back slightly.
If the reversal holds, it would be in stark contrast to the predictions earlier this year of Presicence Point, which has a short position on Celadon. In an article late last year on Seeking Alpha, Presicence said that Celadon’s “refinancing efforts appear to be falling apart as evidenced by its struggles to secure lenders for its proposed credit facility and the cautious tone of its latest refinancing update.” Stock in the company would ultimately be worthless, Prescience said.
That is clearly not the view of Luminus Management. Albrecht said Celadon management believes that Luminus is now its biggest shareholder following Luminus’ filing of a 13G report with the SEC last week that showed it owning 4.57 million shares in Celadon, or 16.17% of the outstanding shares. Luminus had filed a 13G earlier this year, so the acquisition that led to the larger stake and a new filing was not its first purchase of Celadon stock.
The Luminus position as largest shareholder, unless it buys additional stock, would end with the issuance of the new shares to the provider of the $200 million term loan.
Based on what Luminus describes as its investment strategy, the Celadon acquisition would be a divergence from its existing focus areas. Luminus said on its website that its usual sectors for investment are overwhelmingly energy-based.
Albrecht said Celadon management has been in contact with Luminus, but only once since the April 2 announcement warning investors that earlier earnings statements could not be relied upon.
As far as whether Celadon’s financial issues had affected its customer base, Albrecht said the company “has been participating in the strong demand environment like all of our competitors, and we’ve had quite a few more loads than we could handle on any given day. So we feel good about that.” He noted that Celadon has been “proactively” communicating with both employees and customers about its financial position.