Horizon Lines to sell assets, prepare to shut down

Charlotte-based shipping company Horizon Lines said its assets will be acquired by two other shippers and it will shut down its remaining operations because of ongoing losses.

Horizon, which ships freight from domestic ports to Hawaii, Alaska and Puerto Rico, has faced financial difficulties and fines totaling tens of millions of dollars for price-fixing. The company said Tuesday that it is selling its Hawaii shipping lanes to the Pasha Group for about $142 million and selling the rest of its assets to the Matson Group for $456 million.

Horizon is also discontinuing its Puerto Rico shipping, which the company said was unprofitable, by the end of 2014.

Chief Financial Officer Mike Avara said the company employs about 60 people at its Colony Road headquarters, in the SouthPark area. Avara said most of those workers, who carry out corporate functions such as accounting and marketing, are likely to continue in their jobs until the acquisitions close next year. “We’ll still probably need the vast majority of the people here until there’s an actual closing,” said Avara.

After that, it will be up to Matson and Pasha, which are based on the West Coast, to decide the future of the Charlotte employees. About half a dozen Charlotte employees who work on the Puerto Rico shipping are in a “more difficult” situation, Avara said, because those routes are being discontinued.

Fixing its ships, which are more than 40 years old, would cost $20 million next year, the company said. Meanwhile, companies are introducing newer, fuel-efficient ships to compete with Horizon. Shutting down the Puerto Rico operations will incur charges of between $90 million and $100 million, the company said.

“During my short tenure as CEO we have made tough decisions to try to restore profitability in the hopes of continuing the service,” said Steve Rubin. “This decision is a very painful and difficult one for all of us, but it is the only viable course of action for our company, given the circumstances.”

Horizon’s former CEO Sam Woodward resigned in July, and the company replaced him with Rubin.

In 2011, Horizon agreed to pay a $45 million fine and plead guilty in a price-fixing case that sent three company executives to prison. The company had colluded with competitors to set artificially high prices on shipping from the U.S. to Puerto Rico. In March, Horizon agreed to pay an additional $1.5 million more to various government departments in the case.

Horizon lost $18.3 million for the first nine months of the year, the company said last month. That’s up slightly from $17.7 million in losses for the same time last year. The company has about $519 million worth of long-term debt. Horizon will use the money from the Pasha sale to pay down some of the debt before the sale of remaining assets to Matson closes.

This story was originally published November 12, 2014 at 10:59 AM with the headline "Horizon Lines to sell assets, prepare to shut down."