Horizon Lines, a major ocean cargo transportation firm in the state, said its Hawaii shipping volume fell about 5 percent last year amid a slow economic recovery.

The North Carolina-based firm noted the decline in reporting its 2011 financial results Tuesday. Horizon also announced that it eliminated almost one-third of its debt to free up more capital to reinvest in operations.

Horizon reported a $229 million net loss last year compared with a $58 million loss the year before. Most of last year’s loss — $176 million — was attributable to discontinued operations that included a failed China service.

One bright spot was a $74 million fourth-quarter profit from continuing operations, which compared with a $44 million operating loss in the same quarter the year before.

The company projected that its container volume this year will increase by 1 percent to 2 percent and that rates will increase slightly.

Horizon is the second-largest ocean cargo carrier serving Hawaii after Matson Navigation Co. and also serves Alaska and Puerto Rico. The company had been under pressure in recent months to lighten its debt load and resolve a lease obligation for five ships idled after terminating service between the mainland, Guam and China in November. That discontinuation did not affect Hawaii service.

The additional debt reduction announced Tuesday eliminates $228.4 million of debt by giving the debt holders stock equivalent to 83.5 percent of Horizon’s common stock.

Another key part of the deal provides Ship Finance International Ltd., which leased the five ships to Horizon, with $40 million in new debt due in 2016 plus rights to 10 percent of Horizon stock.

Horizon had been on the hook to pay Ship Finance $220.8 million over seven years for the lease, or nearly $32 million a year. It also would cost about $3 million a year to keep the five ships idle.

Holders of Horizon stock before the latest debt-to-equity conversion retain a 6.5 percent stake in the company. Total remaining debt is reduced to about $404 million from about $593 million.

"These transactions successfully close a chapter in the history of Horizon Lines that we have been working diligently to complete for these past many months," Stephen Fraser, interim president and chief executive officer, said in a statement. "Horizon Lines moves forward today from a stronger financial position that will enable us to better focus on customers in our core Jones Act trades and to invest in the future of our business."

Shares of Horizon stock closed Tuesday at $3.80 after the debt announcement but before the earnings announcement. The stock closed Monday at $4.75, and over the past 52 weeks has closed between a high of $53.50 on April 28 and a low of $2.16 on Jan. 17.