Business Context and Reporting Period
Company: Matson, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: September 14, 2016
Event: Entry into a Material Definitive Agreement regarding debt financing.
Key Financial Metrics and Debt Structure
This filing details a new debt issuance rather than operational financial results (revenue, profit, or cash flow are not reported in this document).
- New Debt Issuance: $200 million in 15-year final maturity senior unsecured notes (Series D Notes).
- Interest Rate: 3.14% payable semi-annually.
- Weighted Average Life: Approximately 8.5 years.
- Existing Debt: Approximately $184.3 million in outstanding Series B and C senior unsecured notes.
- Use of Proceeds: Pay down the revolving credit facility and general corporate purposes.
- Guarantors: Matson Navigation Company, Inc., and certain other subsidiaries.
Material Changes and Amortization Schedule
The Series D Notes introduce a specific amortization schedule beginning in March 2019:
- 2019: Semi-annual principal payments of $6.0 million.
- 2020–2023: Semi-annual principal payments of $9.2 million.
- 2024–2031 (Maturity): Semi-annual principal payments of $7.15 million.
The agreement amends and restates the Second Amended and Restated Note Agreement dated June 4, 2012, and includes an uncommitted shelf facility for future note issuances.
Covenants, Risks, and Management Commentary
The 2016 Note Purchase Agreement imposes the following financial covenants:
- Debt to EBITDA: Must not exceed 3.25 to 1.00 for each fiscal four-quarter period (subject to exceptions).
- 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 Limit: Aggregate principal amount of 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: Prepayment is permitted in whole or in part at par plus a yield maintenance premium.
Liens: Incurrence of liens is restricted, with exceptions for permitted liens including those securing Title XI Debt up to certain thresholds.
Investor Verification Checklist
- Verify the exact terms of the yield maintenance premium for early prepayment in Exhibit 10.1.
- Confirm the current status of the revolving credit facility to assess the immediate impact of the $200 million paydown.
- Review the definition of "Priority Debt" and "Consolidated Tangible Assets" in the agreement to understand covenant headroom.
- Check subsequent filings for the utilization of the uncommitted shelf facility mentioned in the agreement.
- Monitor the company's EBITDA performance to ensure compliance with the 3.25x Debt/EBITDA and 3.50x Interest Coverage covenants.