‘Stable’ YRC wins $1.1 billion refinancing, saving $40-50 million in annual interest costs

By John D. Schulz · February 17, 2014

YRC Worldwide, in a major refinancing aimed at lowering its annual interest payments and increasing liquidity for badly needed recapitalization, has refinanced approximately $1.1 billion in debt under much more favorable terms for the 90-year-old trucking company.

The Overland Park, Kan.-based group of long haul and regional LTL carriers said late last week it had closed on the financing of a new $700 million term loan and a $450 million asset-based loan (ABL) facility. The new ABL facility is $50 million larger than the company’s current ABL facility and will support approximately $365 million letters of credit at closing.

The new ABL facility also includes the ability to increase the facility size by an additional $100 million “to accommodate future growth,” YRC said, and may provide additional liquidity for the business going forward.

The proceeds from the new term loan facility will be used to refinance the previous term loan and ABL facilities that were put in place in August 2007 and were subsequently restructured in July 2011. These new facilities will extend maturities to 2019 and will provide annual interest savings to YRC of approximately $40 to $50 million.

The new refinancing effort follows last month’s approval by its 27,000 Teamsters employees of a continuation of a wage and benefit concession package that was the linchpin of the new loan terms.

YRC had been facing about $953 million in debt coming due in the next 15 months. Under the previous loan agreements, it had a $69.4 million bond issue that matured on Feb. 15.  It also previously had $325.5 million of loans due in September and $556.7 million of loans and bonds maturing in March 2015. All told, YRC was operating with more debt than all the other publicly held LTL carriers combined.

“These new senior debt facilities give the company a much less leveraged, simplified and stable capital structure,” YRC Chief Financial Officer Jamie Pierson said in a statement. “They also significantly extend the runway to continue improving the operating performance of YRC Freight and provide a healthy level of liquidity so that we may continue increasing our investment in our people, equipment and technology.”

YRC said this refinancing was made possible by its improved operating performance since James Welch was named CEO in late 2011 following William D. Zollars. Under Zollars, YRC made a series of highly leveraged purchases of Roadway Express in 2003 and USF Corp. in 2005, saddling the company with more than $1.2 billion in long-term debt.

“The new credit agreements are much more flexible than the previous agreements, and when combined with the increased flexibility under our recently ratified (labor concession) extension, we are now well positioned to run the business with an eye toward providing ever-improving service to our customers, attractive jobs for our employees and value for our shareholders,” Pierson said.

Welch called the refinancing “the culmination of a two-year journey and marks the final step” in the company’s capital structure transformation.

“We are pleased with the support we received from each of our stakeholders and will now have the ability to shed many of the distractions of the past several years and focus solely on improving the operations of the business,” Welch said in a statement.  “As one of the nation’s original LTL companies, freight is our business, and we are an essential part of the North American supply chain,” Welch said, noting YRC Freight, Holland, Reddaway and New Penn have 15,000 drivers on the road serving 250,000 customers. 

“Now, we are set to move forward with a competitive, five-year (Teamsters) contract, significantly less debt, reduced interest payments and one of the most experienced teams of freight professionals in North America,” Welch added.

As part of its debt refinancing, YRC is asking shareholders to approve issuance of millions of new shares of common stock that would increase the total outstanding number of shares from 33.3 million to 95 million. YRC’s board has recommended that shareholders approve the move as part of its debt-for-equity swap.

YRC is due to report its fourth quarter and full year 2013 results on Feb. 27.


About the Author

John D. Schulz
John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. John is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis.

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Article Topics

LTL · YRC · YRC Worldwide · All Topics
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