Item 1.01.Entry Into a Material Definitive Agreement.
On April 27, 2020, Matson Navigation Company, Inc. (“MatNav”), a subsidiary of Matson, Inc. (“Matson” or the “Company”) entered into (i) a consolidated agreement (the “Consolidated Agreement”) among MatNav, the United States of America, represented by the Maritime Administrator of the Maritime Administration (“MARAD”) and, with respect to certain provisions, the Company and (ii) a Note Purchase Agreement (the “Note Purchase Agreement”) among MatNav, MARAD, and the Federal Financing Bank (the “FFB”). Pursuant to the Consolidated Agreement, the Note Purchase Agreement and certain related agreements (collectively, the “Title XI Debt Agreements”), MatNav obtained on April 30, 2020, Title XI financing in the amount of approximately $186 million (the “Title XI Debt”). The proceeds of the Title XI Debt were funded in a single advance to MatNav on April 30, 2020.
A fee of approximately $8.7 million was paid to MARAD out of the proceeds at closing. The net proceeds will be used for some or all of the following purposes: (i) to repay a portion of the outstanding balance of Matson’s revolving credit facility, which was drawn in order to finance a portion of the construction costs of Daniel K. Inouye (the “Vessel”); (ii) to prepay at par principal amounts due to Matson’s private noteholders to the extent such noteholders determine to accept Matson’s offer to make such prepayment pursuant to the terms of Matson’s private notes as amended on March 31, 2020; and (iii) for general working capital and corporate purposes.
The Title XI Debt bears cash interest at a rate of 1.22%, payable semi-annually in arrears on April 15 and October 15 of each year commencing on October 15, 2020 (each such date, a “Payment Date”). The effective interest rate on the Title XI Debt for accounting purposes is approximately 1.60%. On each Payment Date, MatNav will also be required to pay principal equal to approximately $4 million. The Title XI Debt will mature on October 15, 2043. MatNav may prepay any amounts outstanding under the Consolidated Agreement subject to a potential prepayment premium or other adjustment, in accordance with the Title XI Debt Agreements. Once amounts under the Title XI Debt are repaid, they may not be reborrowed. Mandatory prepayments are required under certain limited circumstances, including specified casualty events with respect to the Vessel.
Under the Title XI Debt Agreements, MARAD has guaranteed the obligations of MatNav to the FFB. MatNav has agreed to reimburse MARAD for any payments it makes under the MARAD guaranty, and MatNav’s obligations to MARAD with respect to the Title XI Debt are secured by a mortgage on the Vessel and certain related assets, as well as the Existing Vessels (as defined below). In addition, MatNav’s obligations to MARAD with respect to the Title XI Debt are guaranteed by the Company under an Affiliate Guaranty (the “Guaranty”).
The Title XI Debt Agreements contain customary representations and warranties as well as affirmative and negative covenants, defaults and other provisions typical for MARAD-guaranteed financings of this type, with definitions, limitations and financial tests all as negotiated between MatNav and MARAD.
The Title XI Debt Agreements also provide that two vessels securing MatNav’s existing MARAD ship financing (the “Existing MARAD Financing”) – Manukai and Maunawili (the “Existing Vessels”) – also secure the new Title XI Debt until the Title XI Debt on the Existing Vessels is retired in 2028 and 2029, respectively. The balance of the Existing MARAD Financing is $39.6 million as of the date hereof. As part of the Title XI Debt Agreements, certain covenants contained in the Existing MARAD Financing were deleted.
The foregoing description is qualified in its entirety by the terms and conditions set forth in the Consolidated Agreement, the Note Purchase Agreement and the Guaranty, copies of which are filed as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Item 2.03.Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 herein is hereby incorporated in its entirety into Item 2.03 by reference.
