Hawaiian Air triples its debt load
The carrier will use part of the money to pay for four more airplanes
Hawaiian Airlines, which emerged from bankruptcy nine months ago, said yesterday it is nearly tripling the size of its term loans to $135 million and will use some of the proceeds to pay for and retrofit the four Boeing 767 aircraft it recently acquired.
The additional money also will be used to redeem the company's subordinated convertible notes due 2010 and to acquire unspecified assets.
Hawaiian, which has $125 million in unrestricted cash, has been looking for ways to grow since emerging from its 26-month reorganization last June.
The carrier faces increased competition from Aloha Airlines, which came out of bankruptcy last month, and Mesa Airlines, which has said it intends to begin flying interisland next quarter.
"Hawaiian Airlines is solidly positioned for future growth," said Mark Dunkerley, the company's president and chief executive.
Hawaiian Air signed letters of intent last month to buy four 767s to increase the size of its trans-Pacific fleet to 18. It said the jets, previously operated by Delta Air Lines, would require modification work.
In connection with the refinancing, parent company Hawaiian Holdings Inc. issued its lenders warrants to purchase 4 million shares of common stock with an exercise price of $5 a share. Hawaiian can force conversion of the warrants to shares anytime after the average closing price of its stock remains at or above $9 a share for 30 consecutive calendar days.
Hawaiian Holdings' stock has more than doubled since its September lows, and now trades around $5 a share.
Hawaiian's new $135 million capital structure -- an increase of about $91 million from before -- consists of a $62.5 million Term A loan due December 2010 and a $72.5 million Term B loan due March 2011.
The interest on the Term A loan is at LIBOR -- the London interbank offered rate, a reference rate for short-term interest rates -- plus 4 percent, or at a base rate margin specified in the loan. The rate on the Term B loan is 9 percent.
Hawaiian also has a $25 million revolving line of credit.
The redemption of Hawaiian's $52 million of subordinated convertible notes will eliminate potential dilution of approximately 12 million shares that otherwise would have been issued to the holders of the subordinated convertible notes upon conversion at $4.35 per share.