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Horizon Lines Misses Interest Payment on Convertible Notes

Horizon Lines Inc., the shipper negotiating a debt restructuring with its lenders, missed an Aug. 15 interest payment on its $330 million of convertible notes and says it intends to make the payment as it announces an anticipated deal with creditors.

Horizon Lines has “exercised the 30-day grace period” on its 4.25 percent notes due in August 2012, Jim Storey, a spokesman for the Charlotte, North Carolina-based company, said in an e-mailed statement. The company said June 1 that it had entered into agreements with holders of the notes as part of a debt restructuring they expected to complete this month.

The operator of container ships that serve the continental U.S., Alaska, Hawaii and the nation’s territories “intends to make the payment when we announce the expected refinancing transaction, which we anticipate in the near future,” Storey said in the statement.

The bonds traded at 50 cents on the dollar today, according to a person familiar with market prices. That’s down from 54.75 cents on Aug. 15, according to Trace, the bond-price reporting service of the Financial Industry Regulatory Authority. They’ve dropped from 74.5 cents on July 13, Trace prices show.

Shares fell 1.6 percent to 87 cents as of 3:59 p.m. in New York Stock Exchange composite trading.

Declining Volumes

Horizon Lines, which has had three years of mostly declining container volumes, said the agreements it reached with noteholders were part of a deal that would refinance its entire capital structure. In addition to the convertible debt, Horizon Lines has a $225 million senior secured revolving credit facility and a $125 million secured term loan.

The refinancing included $350 million of new five-year, first-lien, 9 percent senior secured notes and an “asset-based” revolving loan of as much as $125 million that it was negotiating with a lender, according to the statement in June.

The company amended the agreements seven times since the announcement and last month extended a deadline by which it was required to receive commitments from holders, according to a July 29 regulatory filing.

The shipper averted a potential May 21 default on the convertible debt after a federal court agreed to reduce a $45 million fine by two-thirds at the request of the government. Horizon Lines had agreed to pay the fine to resolve price-fixing charges.

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