Rand Logistics agrees to debt-for-equity swap via pre-packaged plan

By Caroline Salls

Pittsburgh, Nov. 22 – Rand Logistics, Inc. announced Tuesday that American Industrial Partners (AIP) has agreed to acquire the company in a transaction that will be completed through a pre-packaged plan of reorganization.

According to a Rand news release, the company entered into an agreement under which AIP affiliate Lightship Capital LLC will convert all of Rand’s second-lien debt into 100% of the new common equity of the reorganized company, subject to dilution by shares to be issued under a management incentive plan.

Rand said the transaction will materially de-lever its balance sheet, eliminating roughly $90 million in outstanding debt, and will also dramatically reduce annual interest expense.

As a result of the AIP transaction, Rand said it will enjoy its strongest financial position in recent years.

Rand’s business will continue uninterrupted pending completion of the transaction, the terms of which provide for payment in the ordinary course of all company vendors and other unsecured creditors, according to the release.

“The transaction firmly addresses Rand’s recent balance sheet challenges and positions the company for continued customer service and growth,” Rand president and chief executive officer Edward Levy said in the release.

“We are thrilled to partner with Rand and its leadership team to welcome a new beginning for a clear market leader in shipping and logistics on the Great Lakes,” AIP partner Jason Perri added.

Support agreement

According to an 8-K filed with the Securities and Exchange Commission, Rand entered into a restructuring support agreement with second-lien lender Lightship Capital, which sets the terms of the company’s restructuring under a pre-packaged Chapter 11 bankruptcy plan.

Rand said it will file for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on or before Dec. 19.

Plan terms

Under the pre-packaged plan, all of the second-lien lender’s claims will be cancelled in exchange for 100% of the new common stock to be issued by the reorganized company, subject to dilution by the equity incentive plan.

All unsecured claims will be paid in cash in full or reinstated.

Existing common and preferred shareholders of Rand will have their equity interests cancelled without receiving any recovery or consideration and will cease to have an ownership or financial interest in the reorganized company.

If first-lien revolving credit facility lenders vote to accept the plan and become parties to the restructuring support agreement, their claims will be modified and extended on terms to be agreed and will otherwise be unimpaired.

Sale process continues

Rand said the restructuring support agreement allows it to continue the process of seeking a sale of its assets or equity in a transaction that would fund the plan treatment for allowed administrative claims, other priority claims and allowed general unsecured claims, pay in cash in full all of the claims of the first-lien lenders and the second-lien lender and pay any additional consideration to Rand’s existing common and preferred shareholders.

Specifically, the company said it can move forward with the sale process before its Chapter 11 filing and until Dec. 31.

Rand said it has been in discussions with the first-lien and second-lien lenders regarding the prospect of receiving interim debtor-in-possession financing during the Chapter 11 proceeding and exit financing upon effectiveness of the plan, however, no agreement had been reached as of Tuesday.

Akin Gump Strauss Hauer & Feld LLP represents the company, and Rand is being advised by Stifel Financial and its subsidiary Miller Buckfire & Co., LLC. White & Case LLP represents AIP, and AIP is being advised by Houlihan Lokey Capital, Inc.

Based in New York, Rand provides bulk freight shipping services in the United States and Canada.

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