YRC, lenders carve out deal to cut debt by $300 million

Clearing a significant hurdle in its latest financial restructuring, YRC Worldwide says it has reached a debt-for-equity deal with lenders and other institutional investors to reduce its debt by about $300 million.

By ·

Clearing a significant hurdle in its latest financial restructuring, YRC Worldwide says it has reached a debt-for-equity deal with lenders and other institutional investors to reduce its debt by about $300 million.
 
The financial restructuring is contingent on a “yes” vote by some 26,000 Teamsters on a five-year labor agreement that would extend a 15 percent wage cut and other benefit concessions to its rank-and-file workers. That vote is ongoing, and results will be announced Jan. 8.
 
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. “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.


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.

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

LTL · YRC · All Topics
Latest Whitepaper
Improving Packaging: The Cost of Shipping Air is Going Up
Retailers and manufacturers that insist on using inefficient and sloppy packaging methods—oversized boxes, inefficient packaging, poorly constructed palletized contents—are paying for their mistakes in sharply higher freight rates. Pitt Ohio White Paper, Logistics White Paper, Dimensional Packaging
Download Today!
From the July 2016 Issue
While it’s currently a shippers market, the authors of this year’s report contend that we’ve entered a “period of transition” that will usher in a realignment of capacity, lower inventories, economic growth and “moderately higher” rates. It’s time to tighten the ties that bind.
2016 State of Logistics: Third-party logistics
2016 State of Logistics: Ocean freight
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo