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.
As of Oct. 31, the company had a total of $460.58 million in debt. Its debt-to-assets ratio stands at 18.1%, according to data from Bloomberg Finance.
Auditor Deloitte & Touche LLP has reissued its opinion on UTi's financial results for the year ended Jan. 31, 2013, noting that the company's situation raises "substantial doubt about [the company's] ability to continue as a going concern."
UTi estimated that, if it completes the recapitalization plan, the going-concern warning will be removed.
"We believe these planned sources of liquidity should be sufficient to meet our requirements through at least the end of fiscal year 2015," the company said in its Feb. 26 Form 8-K filing.
UTi reported a net loss of $100.5 million for the year ended Jan. 31, 2013, and said it expects to report a net loss of $61 million to $66 million for the year ended Jan. 31, 2014.
The company blames weakness in transportation markets for its troubles, explaining that "because the macroeconomic and freight environments continue to be challenging, and we have encountered delays and difficulty implementing our business transformation initiatives, it is difficult to estimate our ongoing cash requirements and they could be higher if the environment is worse than we expect."
The company warned that if it fails to execute its business plan, it may need to sell assets or seek other financing sources. Moreover, it said, if it can't complete a debt restructuring, UTi "may be required to cease or curtail our operations or otherwise seek protection from creditors."
As of Oct. 31, UTi's existing debt structure included a $50 million unsecured revolving credit facility from Bank of the West due June 24, 2014 (announced June 24, 2011), bearing interest at Libor plus 150 basis points; a $75 million unsecured letter of credit facility from Nedbank Ltd. due June 24, 2016 (signed June 24, 2011), bearing interest at Libor plus 200; a $52.27 million loan from Commerzbank AG due Jan. 31, 2014, bearing interest at the Euro OverNight Index Average rate plus 170 basis points; a $53.06 million loan from Nedbank due July 6, 2016; and $192.1 million in other facilities that the company did not fully elaborate.
A company spokeswoman said UTi can't comment due to regulatory constraints.
P2 Capital Partners officials couldn't be reached for comment.
The company's three largest shareholders are PT Capital Partners (10.76%), Blackrock Inc. (7.8%) and Royce & Associates Inc. (5.79%), according to data from Bloomberg Finance.