Celadon Group (OTCPink: CGIP) announced that it has received $165 million in new long-term financing.
The new three-year financing plan consists of a $60 million revolving credit facility and a $105 million term loan. The new financing will take the place of its previous revolver. Additionally, the financing partners for the junior tranche of the term loan will receive equity warrants once converted to common shares of CGIP will equal 33 percent of the company’s equity. When combined with shares the group currently owns, the total holding will represent a 49.9 percent equity position.
“This financing provides a solid platform for the next stage of our business turnaround. A strong capital base is critical to providing dependable service for customers, a modern fleet for our drivers, and a stable home for all Celadon associates. We are grateful to our new financing partners for investing the time to understand our plan and the capital to support it,” said Celadon’s Chief Executive Officer Paul Svindland.
Celadon will use the capital to refresh its aging fleet. The company plans to replace roughly 2,000 tractors that are four to five years old with new units. Celadon has received 100 new trucks since May and plans to take delivery of another 100 units in August. The bulk of the replacement, approximately 1,800 trucks, will occur over the next several quarters.
Svindland continued, “These new trucks will dramatically lower our costs, enhance productivity, and improve the lives and safety of our professional drivers.”
In addition to the refinancing, the restructuring at Celadon is planned to return the company to its core services. Over the last few months, Celadon has divested non-core business units, focusing primarily on the North American truckload (TL) market. While the company is in the early innings of a turnaround, it has seen “meaningful improvements” in revenue per seated tractor, service levels and safety.
Celadon had been seeking a more stable financing structure for some time. It had been operating under a temporary credit facility, requiring short-term extensions. At the end of June 2019, Celadon announced that it had received the eighteenth amendment to its credit facility, which extended the maturity approximately one month and provided a modest amount of additional borrowing.
With new financing in place and a turnaround in motion, the company said that it expects to complete its financial statement audit during its second or third quarter in fiscal 2020. “Promptly thereafter, we intend to resume filing financial reports with the [Securities and Exchange Commission] and to seek a listing on a national stock exchange.”
In April 2019, Celadon agreed to pay $42.2 million in restitution to shareholders regarding alleged accounting fraud.
Celadon provides long haul, regional, local, dedicated, intermodal, temperature-protect and expedited freight service across the United States, Canada and Mexico.