Business Context and Reporting Period
Company: Matson, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 28, 2014
Event: Entry into a Material Definitive Agreement regarding the issuance of senior unsecured notes.
Key Financial Metrics and Debt Structure
Debt Issuance: $100 million in 30-year senior unsecured notes.
Interest Rate: 4.35% payable semi-annually.
Weighted Average Life: Approximately 14.5 years.
Use of Proceeds: General corporate purposes.
Guarantors: Matson Navigation Company, Inc. and certain other subsidiaries.
Amortization Schedule
- 2021: $5 million
- 2022-2023: $7.5 million annually
- 2024-2027: $10 million annually
- 2028: $8 million
- 2029-2044: $2 million annually
Material Changes and Covenants
This filing represents a new direct financial obligation. The Note Purchase Agreement includes the following principal negative covenants:
- Debt to EBITDA: Must not exceed 3.25x for any fiscal four-quarter period (with limited exceptions for temporary step-ups).
- EBITDA to Interest Expense: Must not be less than 3.50 to 1.00 at the end of any fiscal four-quarter period.
- Priority Debt Limits: Aggregate Priority Debt must not exceed 20% of Consolidated Tangible Assets (reducing to 17.5% by December 31, 2017, or upon certain events). Non-Title XI Priority Debt must not exceed 10% of Consolidated Tangible Assets.
Prepayment Terms: Permitted at par plus a yield maintenance premium.
Guidance, Outlook, and Risks
Management Commentary: The filing confirms the execution of a previously announced private placement from November 5, 2013, with New York Life Insurance Company and other purchasers.
Risks and Contingencies: The company is now subject to strict financial maintenance covenants. Failure to meet the Debt/EBITDA or Interest Coverage ratios could constitute a default. The filing text does not provide specific forward-looking revenue or profit guidance beyond the debt terms.
Investor Verification Checklist
- Verify the full text of the Note Purchase Agreement (Exhibit 10.1) for detailed definitions of "Priority Debt" and "Consolidated Tangible Assets."
- Confirm the company's current Debt to EBITDA and Interest Coverage ratios to ensure compliance with the new 3.25x and 3.50x covenants.
- Review the impact of the new $100 million debt load on the company's overall liquidity and leverage profile.
- Monitor the amortization schedule starting in 2021 to assess future cash flow requirements.