CEVA Logistics takes steps to recapitalize balance sheet and raise new capital

By Jeff Berman, Group News Editor
April 04, 2013 - LM Editorial

Global third-party logistics (3PL) services provider CEVA Logistics announced positive news on the financial front yesterday in reaching an agreement with its major note holders to recapitalize its balance sheet and raise new capital.

CEVA said that through these efforts—and upon completion of the recapitalization—the company will reduce its consolidated net debt by more than $1.5 billion ($1.2 billion euros) and its annual cash interest expense by more than $173 million ($135 million euros) and also receive a capital infusion of a minimum of $264 million ($205 million euros) for investment in its business plan.

As part of the company’s recapitalization, CEVA said it has entered into a restructuring support agreement with parties representing:
-roughly 83 percent of the outstanding principal amount of the 12.75 percent Senior Notes due in 2020;
-the 12 percent Second-Priority Senior Secured Notes due in 2014;
-$145 million ($113 million euros) in a Senior Unsecured Bridge Loan; and
-69 percent of the outstanding principal amount of the 11.5 percent Junior Priority Secured Notes due in 2018, also referred to as the Second Lien Notes

And the restructuring support agreement, said CEVA, provides for investment commitments of roughly $264 million ($205 million euros) by three parties, including investment funds affiliated with Apollo Capital Management (CEVA’s owner), certain funds advised by Capital Research and Management Company, and CEVA’s largest capital investor. CEVA said that upon completion of the recapitalization these three groups will be its three largest shareholders.

In an interview with LM, CEVA CEO Marv Schlanger said that these efforts will make for a stronger balance sheet for CEVA, which will enable the company to grow faster and better compete in the logistics and supply chain marketplace.

“We will have the flexibility of making additional capex investments, which will allow us to better serve our customers as they grow globally, and it will allow us to build and sell new supply chain products,” he said. “That is very important as the supply chain sector moves forward over the next few years. It is very important and very good for CEVA and strengthens us significantly, and we think that can only be positive for our customers as this transaction allows us to do more for them in terms of better service, more products, more locations and more growth.”

In terms of some of the benefits of increased capex investment, Schlanger said that CEVA’s customers are demanding more transparency and more visibility and more tractability and control of their supply chains at any given point in time.

Part of the gains, he said, will come in increased IT functionality and applications to meet the needs of customers.

“When we close this transaction, I think we will be in a position to move forward to make more investments into these kinds of IT products our customers are asking for and will allow us to differentiate ourselves from the competition,” he said.

Schlanger highlighted the fact that three “very sophisticated and knowledgeable investors” have agreed to put additional capital into the company talks a lot about the endorsement of the company’s management team and business plan it laid out for the investors. He noted that this represents a third-party validation and confirms that these efforts will provide value for CEVA’s customers and employees.

As for the next steps regarding the recapitalization efforts, Schlanger said CEVA will issue an offering memorandum to its debt holders, which formally offers the exchange of debt conditions under which their debt would be exchanged for equity. That exchange offering, he said is open for 20 working days, or 30 calendar days.

“We would expect to have the debt for equity exchange firmed up by early May,” he said. “Going into the transaction, we already have a signed agreement with holders of approximately 83 percent of our senior unsecured debt and 69 percent of our second lien debt, so we are well on our way to getting the transaction successfully completed.”

2012 earnings: CEVA also announced its preliminary unaudited earnings results for 2012 yesterday.

It reported record annual revenue of $9.3 billion ($7.2 billion euros), which represented a 4.8 percent annual gain, while adjusted EBITDA dipped 21.8 percent to $322 million ($251 million euros).

CEVA’s Freight Management business, which is comprised of air, ocean and customs brokerage, was up 6 percent, with lower air volumes out of Europe offset by decent performance on the ocean side out of all regions. And its Contract Logistics business, which includes warehousing and dedicated transport, saw its EBITDA fall 24.4 percent, with CEVA saying that business was impacted by “the continuing general economic downturn with lower volumes in various key markets, in particular Southern Europe.”

IPO no-go: Various reports issued yesterday stated that CEVA has withdrawn its $400 initial public offering (IPO), which was initially filed in May 2012. A report from NASDAQ cited unfavorable financial performance that would adversely affect the offering.

CEVA CFO Rubin McDougall told LM last year that last year’s IPO filing opened the possibility of an IPO down the line.

“It is an administrative step required to have an option to do a listing,” he said. “It is not a commitment to do a listing, nor is it a comment on the size of the listing or the timing. It is just an administrative step. There is no timeframe for it.”



About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

With the holidays rapidly approaching, it appears retailers are not quite done getting inventory set up and on the shelves in time for what is expected to be a fairly active shopping season. That much was evident based on recent data for September volumes issued by the Port of Los Angeles (POLA) and the Port of Long Beach (POLB).

Join Industry Expert Adrian Gonzalez for this educational webinar on the tenets and the benefits of Closed-Loop Operational Management. You’ll learn how Closed-Loop Operational Management optimizes orders, inventory, and transportation concurrently, and how it is able to optimize large-scale problems on a daily basis.

In a separate conference call following CP’s third quarter earnings release call yesterday, CP CEO Hunter Harrison make myriad convincing points for a merger between CP and CSX and offered up his take in general industry M&A as well.

Seasonally-adjusted (SA) for-hire truck tonnage in September checked in at 132.6 (2000=100) for the second straight month, remaining as the current all-time high level for the second month in a row, with November 2013’s 131.0 now the second best month recorded.

Ahead of its third quarter earnings call this Friday, freight transportation and logistics titan UPS rolled out rate increases for 2015 that are set to take effect on December 29, 2014.

Article Topics

News · 3PL · Global Logistics · CEVA · All topics

About the Author

Jeff Berman, News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA