NEW YORK (The Deal) -- UTi Worldwide (UTIW) stock tumbled by 25% Wednesday after it announced that it has breached certain debt covenants and is in danger of defaulting unless it carries out a recapitalization plan.
The British Virgin Islands-based transportation logistics company, whose Nasdaq shares were trading at $11.46 midday Wednesday, has obtained waivers from its lenders through April 15, which will provide some time to implement a plan to refinance some existing debt through the issuance of $675 million in new securities.
UTi shares closed at $15.26 on Tuesday.
UTi, which provides services such as air and ocean freight forwarding, contract logistics, distribution services, supply chain consulting and customs brokerage, intends to launch an offering of $350 million in new convertible notes and also give its largest shareholder, P2 Capital Partners LLC, $175 million in 7% convertible preference shares.That private placement will raise P2 Capital's stake in the company to 18.1% from 10.76%. The New York hedge fund disclosed an activist stake in UTi in October 2012, and said it had discussed initiatives such as "strategic and extraordinary transactions" with the company's management. In addition, Citigroup Global Markets Inc. and Morgan Stanley Senior Funding Inc. have signed a commitment letter to provide a $150 million, five-year, asset-based loan if UTi completes its note offerings and fulfills other closing conditions such as appointing a financial adviser. These new financing measures should allow UTi to refinance about $201 million in existing debt, eliminate restrictive debt covenants and extend its debt maturity profile. UTi has about $171 million in debt maturing during the next nine months.
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