Horizon Global Corporation (NYSE: HZN), the worlds leading manufacturer of branded towing and trailering equipment, today announced the closing of a new financing agreement to provide additional liquidity and an amendment of its existing term debt agreement to relax financial covenants, including the following:
- $51 million new second lien term loan, providing for incremental liquidity and payment of fees
- Amendment to existing first lien term loan to align financial covenants with the Companys business plans and waive financial covenants for the fourth quarter 2018
Horizon Global intends to use a substantial portion of the proceeds from the incremental borrowings to better position the Company to meet its customers needs for its 2019 summer selling season and provide additional operating flexibility.
Carl Bizon, Horizon Global President and CEO, commented, Horizon Global has made significant progress driving operational improvements throughout the business to set a foundation for improved performance in 2019. During the last year, the Company executed the Americas Action Plan to improve performance in this important segment, including realigning the management, operational and sales teams to enhance performance and reduce the cost structure, as well as positioning our new aftermarket and retail distribution center in Kansas City to support our customers during the 2019 peak selling season. This additional financing will help support our focus on providing the best possible service to our North American customers, while also supporting our execution against a number of business improvement initiatives in the Europe-Africa segment, including streamlining logistics, realigning management and optimizing the performance of our manufacturing facilities in the region. The combined efforts of our global team are expected to generate improvements in revenue, margins and cash flow during the year.
In addition to allowing for the second lien term loan and relaxing financial covenants, the amendment increases the rate on the first lien by 300 basis points, with the increase in rate payable in kind. The amendment also calls for the Company to reduce the first lien term loan by $100 million over the course of the next 12 months through asset sales, a junior capital raise, or a combination of both. The Company has already identified an investment bank to assist in this review of alternatives, and that process will begin shortly. The process is intended to help reduce leverage and extend the maturity of the Companys debt structure.
The new second lien term loan will bear interest at LIBOR + 1150 basis points and ultimately would provide lenders warrants to purchase 6.25 million shares of the Companys common stock at $1.50 per share. It will mature on September 30, 2021. The second lien term loan is being provided by significant holders of the Companys convertible senior notes and interest is entirely payable in kind, and, therefore, will not increase the Companys cash interest burden. In connection with the entry into the second lien term loan agreement, Horizon Global agreed to appoint four new members to its Board of Directors, with the new directors constituting a majority of the Board. The Company expects these directors will have a mix of public company board, industry and operational turnaround experience. The Board transition is expected to be completed within seven business days of closing.
The Company previously secured a short-term bridge term loan facility of $10 million, which was repaid from a portion of the proceeds of the new second lien term loan.
Additional information regarding the Companys operations and its results will be provided in conjunction with the Companys release of its fourth-quarter and full-year 2018 earnings results and related conference call on March 18, 2019.
About Horizon Global
Horizon Global is the #1 designer, manufacturer and distributor of a wide variety of high-quality, custom-engineered towing, trailering, cargo management and other related accessory products in North America, Australia and Europe. The Company serves OEMs, dealer networks, retailers, distributors, installers and the end consumer as the category leader in the automotive, leisure and agricultural market segments. Horizon provides its customers with outstanding products and services that reflect the Companys commitment to market leadership, innovation and operational excellence.
Horizon Global is home to some of the worlds most recognized brands in the towing and trailering industry, including: Reese, Hayman-Reese„¢, Draw-Tite, Bulldog, Fulton, ROLA, Tekonsha, and Westfalia. Horizon Global has approximately 4,300 employees in 57 facilities across 21 countries.
For more information, please visit www.horizonglobal.com.
Safe Harbor Statement
This release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements contained herein speak only as of the date they are made and give our current expectations or forecasts of future events. These forward-looking statements can be identified by the use of forward-looking words, such as may, could, should, estimate, project, forecast, intend, expect, anticipate, believe, target, plan or other comparable words, or by discussions of strategy that may involve risks and uncertainties. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which could materially affect our business, financial condition or future results including, but not limited to, risks and uncertainties with respect to: the Companys ability to regain compliance with the NYSEs continued listing standards and maintain such compliance; the Companys leverage; liabilities imposed by the Companys debt instruments; market demand; competitive factors; supply constraints; material and energy costs; technology factors; litigation; government and regulatory actions, including the impact of any tariffs, quotas or surcharges; the Companys accounting policies; future trends; general economic and currency conditions; various conditions specific to the Companys business and industry; the spin-off from TriMas Corporation; the success of our Action Plan, including the actual amount of savings and timing thereof; the success of our business improvement initiatives in Europe-Africa, including the amount of savings and timing thereof; the Company’s exposure to product liability claims from customers and end users, and the costs associated therewith; the Companys ability to meet its covenants in the agreements governing its debt, including the requirement to reduce its first lien term loan, or obtain any amendments or waivers thereto; and other risks that are discussed in the Companys most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. The risks described herein are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deemed to be immaterial also may materially adversely affect our business, financial position and results of operations or cash flows. We caution readers not to place undue reliance on such statements, which speak only as of the date hereof. We do not undertake any obligation to review or confirm analysts expectations or estimates or to release publicly any revisions to any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Director, Corporate Communications & Investor