American Commercial Lines Inc. (ACL) announced Tuesday it had
entered into a restructuring support agreement (RSA) with entities that
currently hold a substantial majority of the company’s term loan debt. Under
the RSA, ACL’s term loan debt, which totals approximately $1 billion, will be
converted to equity. In addition, certain of these term loan lenders will
provide ACL with an additional $200 in capital to support liquidity and
investments in the business. Once the restructuring is completed, these term
loan lenders will own the vast majority of equity in a financially restructured
ACL. The identities of the lenders were not disclosed.
ACL is one of the U.S.’s largest barge operators, with a fleet of 3,094
dry cargo barges, 406 liquid barges and 188 towboats.
Prepackaged bankruptcy filing
To implement the RSA, ACL indicated it plans to file a
“prepackaged” bankruptcy package and reorganization plan under Chapter 11 of
the U.S. Bankruptcy Code. The filing is expected to occur by the end of this
week in the U.S. Bankruptcy Court for the Southern District of Texas, Houston
Division.
In addition to the conversion of nearly $1 billion in debt to
equity and $200 million in new capital, ACL also indicated that the company had
received a commitment for debtor-in-possession (DIP) financing consisting of a
$640 million asset-based loan and a $50 million term loan from certain of its
existing lenders.
Vendors will be paid
The company stressed that its operations would continue in a
normal fashion during this court-supervised reorganization process. ACL also
indicated that it intends to pay its vendors and suppliers in full under normal
terms for goods and services provided on or after the filing date. The company
stated that under the terms of the prepackaged plan and subject to court
approval, general unsecured pre-petition claims also would be paid in full
under the ordinary course of business.
While ACL’s current term loan lenders will control the vast
majority of the company’s equity upon reorganization, sources indicate that
California-based Platinum Equity will retain a small minority stake in the
newly reorganized ACL. Platinum acquired ACL’s equity at the end of 2010 for
approximately $432 million. The transaction also included $345 million in
long-term debt, giving ACL a total enterprise value of $777 million at that
time.
Major challenges
In a release announcing the reorganization, Mark Knoy, president
and CEO of the company, stated that, “ACL has built a decades-long industry
leadership position through key investments in our fleet and a relentless focus
on safe and reliable operations. Like many others in our industry, over the
last four years ACL has been affected by challenging market conditions, the
weather and the closure of key areas of the river system for extended periods
of time. We have responded to these challenges by reducing costs and
maintaining a high degree of financial discipline. The actions we are now
taking will significantly reduce our outstanding debt and the associated costs
to service that debt, freeing up our available resources to be fully devoted to
competing in today’s market.”
ACL’s heavy debt load has been hanging over the company like the
sword of Damocles for the past several years. Like the rest of the industry,
ACL’s fortunes have been whipsawed in the years after 2014, when the barge
industry was earning heady profits. In the spirit of those times, ACL acquired
most of the barge assets of AEP River Operations from American Electric Power
in 2015 for approximately $550 million. Much of ACL’s current term loan debt
dates from this period as it was used to help finance its acquisition of AEP
barge assets and also to refinance previously incurred debt. This term loan
debt, which now will be converted to equity, was scheduled to mature later this
year.
