Maui Land & Pineapple Co. has completed definitive agreements with all holders of $40 million of its debt to repurchase the notes.
In a filing with the Securities and Exchange Commission Tuesday, the company said it had reached agreement with the last remaining noteholders on July 22. It had earlier stated that four-fifths of the creditors had agreed to the deal.
As a result, debt-laden ML&P hopes to retire a large chunk of its obligations that otherwise would have required it to go to financial markets to refinance the $40 million as early as next year. Considering the company’s money-losing status, refinancing would have been difficult and expensive.
Inability to replace the debt with new debt or retire it could have triggered incidents of default with other corporate loans.
In May, the board of directors authorized an additional 20 million shares to be offered to the creditors.
The conversion of debt to equity is structured as a rights offering to existing shareholders who were offered the right to purchase additional shares in the company, raising money to pay back lenders.
If this rights offering is successful — it closes today — ML&P will retire all of its outstanding senior secured convertible notes.
It has another large block of debt, $57.8 million, coming due in March.
This debt also will have to be retired, rolled over or restructured in order to keep the company clear in all its covenants with its lenders.
It also has an agreement that requires it to pay Kapalua Bay Holdings $35 million for the spa, beach club and store that were part of the nearly $400 million Residences at Kapalua joint venture.
Since the company is creating revenue in the neighborhood of $40 million per year, it has no prospect of reducing debt from earnings in any meaningful way – even if it does make a profit, which it hasn’t lately – so it must either sell assets or restructure debt or, as it did with the $40 million in notes, convert creditors into owners.