(Bloomberg) -- Credit investor Caspian Capital provided the majority of new financing lined up by Hornblower Group, the cash-strapped operator of the NYC Ferry system, amid a steep drop in passengers during the pandemic.
Caspian, which specializes in lending to troubled companies, backed over half of the $90 million loan that was raised in recent days, according to people with knowledge of the situation. The firm, an existing investor in Hornblower, provided 50.1% of the loan, while other investors were invited to participate in the remainder, the people said.
The loan carries interest of about 11% and matures in October 2023, said the people, who asked not to be identified discussing a private matter. The deal gives Hornblower flexibility by letting it repurchase the debt in full in the first year, the people said.
Representatives for San Francisco-based Hornblower and New York-based Caspian declined to comment.
Cash Needs
Hornblower, which also serves tourist destinations like the Statue of Liberty, Niagara Falls and Alcatraz Island, has been burning through cash as the coronavirus outbreak and public health restrictions keeps riders away. Concern about NYC Ferry’s viability has been rising with the approach of colder months, when traffic is typically the weakest. Some of Hornblower’s other private operations are still on hold.
Hornblower arranged the financing by moving assets from its Niagara Cruises business into an unrestricted subsidiary, putting them beyond the reach of current creditors, and then pledging the assets to support the new debt, Bloomberg previously reported.
At the peak of the pandemic, Hornblower called on its existing funds and sponsor to ease its cash crunch. The San Francisco-based company drew on a $75 million credit line and accepted a $45 million line of credit from Crestview Partners, its private equity backer. Hornblower’s existing $675 million first-lien loan due 2025 was quoted around 74 cents on the dollar, down from the mid 80s earlier in the week, according to people familiar with the pricing.
The coronavirus pandemic created new targets for credit investors to buy at steep discounts, with the total approaching $1 trillion in March, according to data compiled by Bloomberg.
Caspian Capital invests in corporate debt with a focus on stressed and distressed issuers. It spun off from former parent Mariner Investment Group around a decade ago. Having a majority position in a credit often gives investors the right to negotiate the terms of future debt documents with the company.
©2020 Bloomberg L.P.
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