Business Context and Reporting Period
This Form 8-K Current Report from Matson, Inc. (MATX) covers events occurring on June 22, 2020, with the report filed on June 25, 2020. The filing details a material definitive agreement entered into by Matson Navigation Company, Inc. (MatNav), a subsidiary of Matson, Inc., involving new government-guaranteed financing.
Key Financial Metrics
- New Financing: Approximately $140 million in Title XI Debt obtained from the Federal Financing Bank (FFB), guaranteed by the Maritime Administration (MARAD).
- Interest Rate: Cash interest rate of 1.35% payable semi-annually; effective accounting interest rate of approximately 1.73%.
- Principal Repayment: Approximately $3 million required on each payment date (March 15 and September 15).
- Maturity Date: March 15, 2044.
- Transaction Costs: A fee of approximately $6.7 million was paid to MARAD at closing.
- Existing Debt: The balance of existing MARAD ship financing (Existing MARAD Financing) is $225.5 million as of the filing date.
- Use of Proceeds: Net proceeds are designated to repay a portion of the outstanding balance of Matson's revolving credit facility, which was used to finance construction costs for the vessel Kaimana Hila.
Material Changes
The primary material change is the addition of $140 million in long-term debt secured by a mortgage on the new vessel Kaimana Hila and certain related assets. Additionally, three existing vessels (Manukai, Maunawili, and Daniel K. Inouye) securing prior MARAD financing will also secure this new debt until the prior financing is retired between 2028 and 2043. The filing does not provide comparative revenue, profit, or cash flow metrics for the period.
Guidance, Risks, and Contingencies
- Covenants: The Title XI Debt Agreements include customary affirmative and negative covenants, defaults, and financial tests negotiated between MatNav and MARAD.
- Prepayment Terms: MatNav may prepay amounts subject to potential premiums or adjustments. Mandatory prepayments are required under limited circumstances, such as specified casualty events regarding the vessel.
- Guarantees: MatNav's obligations are guaranteed by Matson, Inc. under an amended Affiliate Guaranty. MARAD guarantees MatNav's obligations to the FFB.
- Reborrowing: Once amounts under the Title XI Debt are repaid, they may not be reborrowed.
Investor Verification Checklist
- Verify the impact of the $6.7 million closing fee on immediate cash flow and net proceeds.
- Confirm the specific terms of the "potential prepayment premium" mentioned in the agreement.
- Review the financial covenants and tests detailed in the attached exhibits (10.1, 10.2, 10.3) to assess compliance risks.
- Monitor the repayment schedule of the revolving credit facility to confirm the reduction in short-term debt.
- Assess the cross-collateralization risk involving the three existing vessels securing both old and new debt.