Report says YRC Worldwide seeks $1.15 billion in loans to refinance debt load

In an effort to restore its financial footing and refinance its debt load, less-than-truckload (LTL) transportation services provider YRC Worldwide is looking to collect $1.15 billion in loans, according to a Bloomberg report published yesterday.

The report said the loan is comprised of a $700 million term loan and a $450 million asset-backed portion to be due in five years. And it added the loan is contingent on YRC’s 26,000 Teamsters members voting to extend its current labor contract into 2019, which would keep pay cuts from its previous deal intact while also adding operating flexibility. Voting began yesterday and runs through today, with results available tomorrow, a union representative told Bloomberg.

This attempt to refinance YRC is in advance of a $69.4 million bond that matures on February 15, according to Bloomberg.

In late December, YRC Worldwide reached a debt-for-equity deal with lenders and other institutional investors to reduce its debt by about $300 million.
 
A “yes” vote by its 26,000 Teamsters on a five-year labor agreement would extend a 15 percent wage cut and other benefit concessions to its rank-and-file workers. 

YRC needs the Teamsters concession as part of a longer term corporate refinancing.
In addition, the debt reduction deal is contingent on getting holders of at least 90 percent of the $124 million of the company’s pension fund debt to amend and extend the currently outstanding note.
 
“The agreement is a momentous step toward delevering the company’s balance
sheet, significantly improving the company’s credit profile, and is expected to
secure some of the best paying jobs in the LTL industry,” James Welch,
YRC chief executive officer and president of YRC Freight, said in a statement on December 23. “The last two years have been a long and hard fought journey in turning around one of the largest trucking companies in America. After shedding a significant portion of our non-core assets and operations and with the help of our unionized and non-unionized employees, we have focused our attention back to what we do best — North American LTL trucking,” Welch added.
 
Under the agreement, the investors will inject $250 million in cash for
newly-issued shares of common stock of YRC Worldwide at a price of $15 per
share. YRC shares jump more than 20 percent to around $18 on the day the debt-for-equity swap was announced.
 
The proceeds will be used to pay off about $69 million in existing 6 percent convertible notes due February 2014 and defease and/or pay off the existing Series A Convertible Notes due March 2015. YRC has $325 million in debt payment due next September and $675 million due in March 2015.
 
In addition, holders of approximately $50 million principal amount of the existing Series B Convertible Notes due March 2015 will convert those notes to common stock at a price of $15 to $16.01 per share, further reducing debt. The Series B Note holders that participate in the proposed transaction will also consent to amend the indenture to remove substantially all covenants and release the collateral securing those notes, YRC said. The remaining Series B Convertible Notes may continue to be outstanding until their scheduled maturity of March 31, 2015.
 
Consummation of the agreement is subject to “a number of other customary conditions as well,” YRC said, but did not elaborate.
 
“These transactions will result in a substantial reduction of our debt and will position the company to address impending maturities, including the 6 percent convertible notes due in February 2014,” said Jamie Pierson, YRC Worldwide CFO. “These transactions also clear the way for us to enter the senior debt markets to refinance our current term and asset- based loans at more favorable interest rates.”
If the Teamster ratify continuation of the wage concession package, YRC said its improved financial picture will allow the company to increase its investment in new tractors, trailers, technology and “equally if not more importantly training and developing its people.” But that promise came with a subtle warning from the company.

“Alternatively, if we are not successful, it would unfortunately mean some very difficult decisions for the company and its employees,” added Welch.
 
YRC has lost in excess of $2.6 billion since 2006. Most of those losses are because of interest payments on more than $1.4 billion in debt. Most of that debt was incurred because of a pair of $1 billion-plus acquisitions, long-haul rival Roadway Express in 2003 and regional LTL carrier USF Corp. in 2005.

Those deals were engineered by former CEO William Zollars, who left the company two years ago.