Hawaiian Airlines has obtained financing that allows it to pay down convertible notes that would have been dilutive to its shareholders had they converted into equity. The airline, which emerged from bankruptcy in June 2005, has expanded its credit facility by $91 million to redeem the notes, as well as buy four Boeing aircrafts. Wells Fargo Foothill leads the term loan "A" portion of the facility and Canyon Capital Advisors leads the term loan "B."
Hawaiian Airline's lenders increased the term loan "A" to $62.5 million from $25 million and the term loan "B" to $72.5 million from $25 million. The credit line also consists of a $25 million revolving line of credit. Pricing on the term loan "B" was decreased to LIBOR plus 9% from LIBOR plus 10%. The LIBOR plus 4% pricing on the term loan "A" did not change.
"It was very important to us to be able to redeem the convertible debentures," said Peter Ingram, cfo of Hawaiian Airlines. "They would have been significantly dilutive to us." The redemption of the airline's $52 million convertible notes will eliminate dilution of approximately 12 million shares, which would have converted at $4.35 a share.
As part of the agreement, the term loan "B" lenders have the right to buy 4,050,000 shares of the company's common stock at $5 a share. The purchase warrants contain a forced conversion feature that allows Hawaiian Airlines to force conversion of the warrants after the average closing price of the company's common stock is at or above $9 a share for 30 consecutive days. Although the ability of the term loan "B" lenders to buy shares in the company is also dilutive to its shareholders, Ingram said the conversion of the convertible notes would have been much worse for its shareholders.
Wells Fargo Foothill and Canyon Capital Advisors were lead arrangers on the previous loans and have long-standing relationships with the airline. Ingram also said they offered the most attractive terms to the company when it sought to expand its financing. Imperial Capital, a boutique investment bank, is the broker that organized the financing and whom Hawaiian approached to do the deal. Imperial has worked with Hawaiian since it emerged from bankruptcy.