Navistar, XPO, Others Tap Private Debt Markets to Improve Liquidity

May 05, 2020 by Jerry Hirsch, @Jerryhirsch

Navistar International Corp. and XPO Logistics Inc. are tapping the private debt market to raise working capital as a strategy for navigating the coronavirus-pandemic recession.

Other trucking-related businesses affected by the pandemic, including restaurant supplier U.S. Foods, are doing the same.

The companies are using a provision in the federal Securities Act of 1933 that allows them to offer private debt instruments without Securities and Exchange Commission or state registration. The notes can’t be sold in the U.S. unless they are registered.

Companies are working to raise cash to manage through the sudden turndown in their operations.

Lilse, Ill.,-based Navistar said Monday that it completed a private offering of $600 million at a 9.5% interest rate. The offering was $100 million more than Navistar first sought. The notes come due in 2025. They are secured by a first lien stock pledge on Navistar International B.V. that indirectly owns the company’s foreign manufacturing operations, according to Fitch Ratings.

“This is a strategy to bolster working capital. It’s also a proactive measure to preserve the health of the company during this uncertain time,” Navistar said in a statement for Transport Topics.

Navistar owns the International truck and IC bus brands. It is looking shore up working capital because truck demand is plunging due to the recession. The company ended its first fiscal quarter on Jan. 31 with about $1 billion of cash, according to an SEC filing.

Fitch recently downgraded Navistar’s existing ratings to reflect the negative impact of the coronavirus pandemic on the company’s heavy-duty truck market. The corporate credit rating service said it believes NAV’s earnings and liquidity will be constrained for at least two years.

Traton, the truck subsidiary of Volkswagen AG, submitted a proposal earlier this year to acquire Navistar. The potential deal could be delayed due to the coronavirus pandemic, according to Fitch.

Last week, Greenwich, Conn.-based XPO priced $850 million of senior notes due 2025 at a 6.25% interest rate.

XPO plans to use the money for general corporate purposes, which it said could include the repayment of other debt that carries a 6.5% interest rate and are due in 2022. The senior notes are due in May 2025.

As of Dec. 31, XPO had $377 million in cash and $84 million in working capital, according to its annual report.

The motor carrier is expected to update those figures when it reports first quarter financial results on May 5.

The logistics company is positioned to take advantage of technology to rebound from the pandemic-caused recession, according to Bruce Chan, an analyst at

“XPO Logistics has been an early leader on the technology front, and its innovative e-commerce solutions and extensive value-added portfolio offer significant growth runway,” Chan said in a recent report to investors.

Rosemont, Ill.,- based US Foods Holding Corp. priced a $1 billion offer at 6.25%. The notes also come due in 2025.

The food distributor will use the money for general corporate purposes. It also will use some of the funds for its recent $970 million purchase of Smart Stores Holdings Corp.

Jerry Hirsch April 29, 2020
Transportation analytics firm INRIX found that the COVID-19 pandemic’s impact on freight movement is less than other forms of ground transportation.

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