HORIZON LINES COMPLETES MANDATORY DEBT CONVERSION
News Release
Horizon Lines, Inc. (Corporate Headquarters)
January 16, 2012
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD><TITLE></TITLE>
<META content="text/html; charset=unicode" http-equiv=Content-Type>
<META name=GENERATOR content="MSHTML 8.00.6001.18904"></HEAD>
<BODY>
<DIV>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><EM><STRONG>$49.7 Million of
6.00% Series B Mandatorily Convertible Senior Secured Notes Exchanged for Common
Stock and Warrants</STRONG></EM></P>
<P></P>
<TABLE style="MARGIN-BOTTOM: 6px" id=content_LETTER.BLOCK4 border=0
cellSpacing=0 cellPadding=5 width="100%">
<TBODY>
<TR>
<TD style="FONT-FAMILY: Arial,Helvetica,sans-serif; FONT-SIZE: 10pt">
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"><STRONG>CHARLOTTE,
NC,</STRONG> (January 11, 2012) --- Horizon Lines, Inc. today announced
that it has completed the mandatory debt-to-equity conversion of
approximately $49.7 million of the company's 6.00% Series B Mandatorily
Convertible Senior Secured Notes (the "Series B Notes"). The
mandatory conversion reduces debt, lowers annualized interest payments and
is expected to increase the value of the company's shares
outstanding. </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"> </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt">Under
the terms of the company's recapitalization plan that was undertaken in
October 2011, the Series B Notes are mandatorily convertible into shares
of common stock or warrants in two equal installments on the three-month
and nine-month anniversaries of their issuance, subject to certain
conditions. </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"> </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt">In
accordance with these terms, on January 10, 2012, the company mandatorily
converted approximately $49.7 million of the Series B Notes at a
conversion rate of 54.7196 shares of common stock (reflecting the 1-for-25
reverse stock split of the company's common stock effective December 7,
2011) per $1,000 principal amount of Series B Notes. Approximately
$18.5 million of the Series B Notes were converted into 1,014,839 shares
of common stock with the remainder being converted into warrants
exercisable into shares of common stock. The distribution of common
stock and warrants was based upon the U.S. citizenship verifications of
the holders of the Series B Notes. Foreign holders, or holders who did not
provide proof of U.S. citizenship, received warrants exercisable by U.S.
citizens into an applicable quantity of common stock. All fractional
interests were paid in cash.</P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"> </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt">"This
mandatory conversion reduces the company's annualized interest payments by
approximately $3.0 million and represents a major step in deleveraging the
company's balance sheet under the opportunities provided by our new
capital structure," said Stephen H. Fraser, President and Chief Executive
Officer. "Affording us the ability to decrease debt is an essential
component of the refinancing structure that we put in place last October
with the help of our note holders. Issuing stock as a means to replace
debt also allows us to immediately increase the total market value of our
equity, as well as build shareholder value over time."</P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"> </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt">Subject
to certain conditions, the remaining approximately $49.7 million in
aggregate principal amount of the Series B Notes is scheduled to be
mandatorily converted into shares of common stock and warrants in July
2012. The Series B Notes will be automatically converted into 6.00% Series
A Convertible Senior Secured Notes due 2017 on October 5, 2012 if the
company is unable to effect mandatory conversion before
then.</P></TD></TR></TBODY></TABLE></DIV></BODY></HTML>
<HTML><HEAD><TITLE></TITLE>
<META content="text/html; charset=unicode" http-equiv=Content-Type>
<META name=GENERATOR content="MSHTML 8.00.6001.18904"></HEAD>
<BODY>
<DIV>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><EM><STRONG>$49.7 Million of
6.00% Series B Mandatorily Convertible Senior Secured Notes Exchanged for Common
Stock and Warrants</STRONG></EM></P>
<P></P>
<TABLE style="MARGIN-BOTTOM: 6px" id=content_LETTER.BLOCK4 border=0
cellSpacing=0 cellPadding=5 width="100%">
<TBODY>
<TR>
<TD style="FONT-FAMILY: Arial,Helvetica,sans-serif; FONT-SIZE: 10pt">
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"><STRONG>CHARLOTTE,
NC,</STRONG> (January 11, 2012) --- Horizon Lines, Inc. today announced
that it has completed the mandatory debt-to-equity conversion of
approximately $49.7 million of the company's 6.00% Series B Mandatorily
Convertible Senior Secured Notes (the "Series B Notes"). The
mandatory conversion reduces debt, lowers annualized interest payments and
is expected to increase the value of the company's shares
outstanding. </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"> </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt">Under
the terms of the company's recapitalization plan that was undertaken in
October 2011, the Series B Notes are mandatorily convertible into shares
of common stock or warrants in two equal installments on the three-month
and nine-month anniversaries of their issuance, subject to certain
conditions. </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"> </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt">In
accordance with these terms, on January 10, 2012, the company mandatorily
converted approximately $49.7 million of the Series B Notes at a
conversion rate of 54.7196 shares of common stock (reflecting the 1-for-25
reverse stock split of the company's common stock effective December 7,
2011) per $1,000 principal amount of Series B Notes. Approximately
$18.5 million of the Series B Notes were converted into 1,014,839 shares
of common stock with the remainder being converted into warrants
exercisable into shares of common stock. The distribution of common
stock and warrants was based upon the U.S. citizenship verifications of
the holders of the Series B Notes. Foreign holders, or holders who did not
provide proof of U.S. citizenship, received warrants exercisable by U.S.
citizens into an applicable quantity of common stock. All fractional
interests were paid in cash.</P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"> </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt">"This
mandatory conversion reduces the company's annualized interest payments by
approximately $3.0 million and represents a major step in deleveraging the
company's balance sheet under the opportunities provided by our new
capital structure," said Stephen H. Fraser, President and Chief Executive
Officer. "Affording us the ability to decrease debt is an essential
component of the refinancing structure that we put in place last October
with the help of our note holders. Issuing stock as a means to replace
debt also allows us to immediately increase the total market value of our
equity, as well as build shareholder value over time."</P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt"> </P>
<P
style="MARGIN-TOP: 0px; FONT-FAMILY: Arial,Helvetica,sans-serif; MARGIN-BOTTOM: 0px; FONT-SIZE: 10pt">Subject
to certain conditions, the remaining approximately $49.7 million in
aggregate principal amount of the Series B Notes is scheduled to be
mandatorily converted into shares of common stock and warrants in July
2012. The Series B Notes will be automatically converted into 6.00% Series
A Convertible Senior Secured Notes due 2017 on October 5, 2012 if the
company is unable to effect mandatory conversion before
then.</P></TD></TR></TBODY></TABLE></DIV></BODY></HTML>