UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 23, 2009
VELOCITY EXPRESS CORPORATION
(Exact Name of Registrant as Specified in Charter)
| Delaware | 0-28452 | 87-0355929 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| One Morningside Drive North Bldg. B, Suite 300 Westport, Connecticut |
06880 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrants’ telephone number, including area code: (203) 349-4160
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 | Regulation FD Disclosure. |
Velocity Express Corporation (the “Company”) intends to meet with holders of its 12% Senior Secured Notes due 2010 (the “Notes”) to seek consent to a new credit facility with a third party lender, which facility would replace and increase the credit limit of its Existing Credit Facility (defined below). On November 12, 2008 the Company executed a commitment letter with Burdale Capital Finance, Inc. (“Burdale”), an indirect U.S. subsidiary of the Bank of Ireland, and, shortly thereafter, launched a consent solicitation to the holders of the Company’s Senior Secured Notes Due 2010 to obtain their consent for the Trustee of the Notes to enter into a Fifth Supplemental Indenture and revised Intercreditor Agreement to permit us to close on the new revolving credit facility. Following feedback from the bondholders, on January 26, 2009, the Company and Burdale entered into an amended and restated commitment letter with respect to a new $17 million secured revolving credit facility to be provided by Burdale, which the Company hopes to consummate in the next two weeks subject to Noteholder approval. No assurance can be given that such approval will be obtained.
Existing Credit Facility
The Company is party to a Credit Agreement with Wells Fargo Foothill, Inc. (“WFF”), dated December 22, 2006, as amended (the “Existing Credit Facility”). Under the Waiver and Eleventh Amendment of such Credit Agreement dated May 19, 2008, the Company agreed to seek a commitment letter from a third party lender to provide financing to the Company in an amount sufficient to prepay obligations to WFF under the Existing Credit Facility. The Company has already paid fees of $400,000 since August 2008 for failing to meet certain timetables to obtain such replacement financing, and may incur additional fees in the future.
The Company has $6.6 million in loans and $2.7 million in letters of credit outstanding, and no additional borrowing availability, under the Existing Credit Facility. The Company is required to have a special reserve against available borrowing starting at $1,000,000 and rising by $25,000 each week commencing on June 30, 2008 through November 30, 2008, by $37,500 per week from December 1, 2008 to February 28, 2009, by $50,000 per week from March 1, 2009 to May 31, 2009, and $62,500 per week from June 1, 2009 to December 31, 2009 or until the Existing Credit Facility is paid in full. In addition, Foothill increased the reserve by an additional $362,500 this week over and above the reserve amounts specified in the Eleventh Amendment. The lack of borrowing capacity, the special reserve and fees described above place significant strain on the Company’s liquidity position, and make it difficult to withstand economic downturns and competitive pressures.
Replacement Financing
The Company has received the Commitment Letter from Burdale as described above, which the Company believes to be beneficial to the Company and the holders of the Notes (the “Noteholders”). The Commitment Letter is subject to numerous conditions including, without limitation, satisfaction of certain financial covenants and final documentation. The Company and Burdale have agreed to certain financial covenants which reflect our current internal revenue forecasts as a result of the current recession as well as our projected offsetting cost savings. Projected EBITDA for calendar 2009 is $20 million based on a revenue forecast of $300 million which is driven by: (1) increased volume from the healthcare industry (which represents 30% of total revenue) and (2) growth opportunities in store replenishment for the retail industry, and (3) the United States Postal Service WorkShare program including in-bound and out-bound package volumes.
One of the material remaining conditions to the Burdale financing as outlined in the Commitment Letter is the requirement for the Company to obtain the consent of holders of a requisite percentage of its outstanding Notes to various aspects of the financing under the Commitment Letter, including the amount of such financing
(currently contemplated to be a maximum of $17 million). Another condition of the Commitment Letter is that the trustee for the Noteholders enters into a new intercreditor and subordination agreement on behalf of the Noteholders, to replace the existing Intercreditor Agreement, dated as of December 22, 2006, with Wells Fargo Foothill, Inc. The terms of the new intercreditor and subordination agreement are less favorable to the Noteholders in some respects than the existing terms.
At this time, the Company is soliciting the Noteholders for their consent to the transactions contemplated by the Commitment Letter, including a Fifth Supplemental Indenture and a new Intercreditor Agreement. No assurance can be given that the Company will obtain the Noteholders consent required to effectuate the New Credit Facility, the Fifth Supplemental Indenture and the new Intercreditor Agreement, or that the Company will otherwise satisfy the conditions imposed by the Commitment Letter for the Burdale financing. Without Noteholders consent, we will not be able to consummate the Burdale financing.
Global Alliance
As reported previously, the Company is working to develop a global alliance of first-tier domestic delivery companies in a number of countries, with the Company as the anchor company in the United States. The global alliance being developed would launch a worldwide delivery service, utilize the Company’s state of the art technology throughout the supply chain for customers of alliance members, and leverage customer relationships of each alliance member to drive business to the alliance partners, thereby increasing revenues for all alliance members. The proposed terms of the global alliance call for an investment by each prospective alliance member, structured in a manner that may help the Company reduce its financial leverage. At this time, several prospective alliance members from Europe and Asia are conducting due diligence evaluations and the Company has been in negotiation with these and other prospective partners in various countries around the world toward the goal of achieving an alliance. While these negotiations appear to be advancing, no agreements have been reached, and no assurances can be given that any alliance arrangements will ever be consummated or what the structure or terms of such an arrangement would be or whether the alliance would operate successfully if agreement could be reached.
The information in Item 7.01 of this Current Report in Form 8-K, will not be treated as “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section. This information will not be deemed incorporated by reference into a filing under the Securities Act of 1933, or into another filing under the Exchange Act, unless that filing expressly refers to specific information in this Item 7.01 of this report.
Forward Looking Statements
This Current Report on Form 8-K contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements with respect to its prospective new senior financing. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. Forward-looking statements represent the Company’s management’s judgment regarding future events. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, the Company can give no assurance that such expectations will prove to be correct. All statements other than statements of historical fact included in this Current Report on Form 8-K are forward-looking statements. In particular, statements regarding our financial position and financial forecasts, and our ability to increase revenues from the health care and retail industries, as well as through the US Post Office program, are forward looking statements. The Company cannot guarantee the accuracy of the forward-looking statements, and you should be aware that the Company’s actual results could differ materially from those contained in the forward-looking statements due to a number of factors,
including the statements under the heading “Risk Factors” contained in the Company’s filings with the Securities and Exchange Commission. Further, statements regarding financial forecasts are dependent upon the Company’s ability to obtain the consent of the Noteholders to the Burdale financing and to then consummate such financing, and no assurance can be given that such consents will be given or financing consummated.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| VELOCITY EXPRESS CORPORATION | ||
| By: | /s/ Edward W. Stone | |
| Name: | Edward W. Stone | |
| Title: | Chief Financial Officer | |
Date: January 26, 2009