Horizon Lines, Inc

14 Pages Posted: 30 May 2017

See all articles by Kenneth M. Eades

Kenneth M. Eades

University of Virginia - Darden School of Business

Daniel Hake

University of Virginia - Darden School of Business

Abstract

It is recommended that this case be taught either just before or just after another Chapter 11 case. Students must to decide whether Horizon Lines should seek Chapter 11 protection or attempt a voluntary financial restructuring. Students have a wide range of financial restructuring alternatives to consider that should give them an appreciation of the advantages and disadvantages faced by a firm choosing to use the bankruptcy court. The case also is best taught to experienced students who understand corporate finance fundamentals and, in particular, grasp the principes of valuation and capital structure.

Excerpt

UVA-F-1668

Rev. Nov. 22, 2016

Horizon Lines, Inc.

Even a small leak will sink a great ship

—Benjamin Franklin

By April 1, 2011, the Horizon Lines 2010 annual report had been published with a statement from newly appointed CEO Stephen Fraser, explaining that the company expected to be in technical default on its debt. During the previous 50 years, Horizon Lines (Horizon) had revolutionized the global economy with the invention of containerized shipping to become the largest U.S. domestic ocean carrier. By the beginning of 2007, however, Horizon was unprofitable, and its losses had increased each year since (Exhibit 1). As negative earnings mounted, so did Horizon's debt burden: current liabilities had nearly quadrupled by the end of 2010 (Exhibits2 and3). The company had also suffered two major setbacks in the past six months: the loss of a key strategic alliance and $ 65 million in criminal and civil fines.

. . .

Keywords: Chapter 11, financial restructuring, valuation, capital structure

Suggested Citation

Eades, Kenneth M. and Hake, Daniel, Horizon Lines, Inc. Darden Case No. UVA-F-1668, Available at SSRN: https://ssrn.com/abstract=2974488 or http://dx.doi.org/10.2139/ssrn.2974488

Kenneth M. Eades (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4825 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/eades.htm

Daniel Hake

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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