YRCW moves forward with financial restructuring

By John Schulz · July 11, 2011

Less-than-truckload (LTL) freight transportation services provider YRC Worldwide (YRCW) said today it has obtained commitments for a three-year, $400 million asset-based loan (ABL) facility that will replace its current asset-backed securitization (ABS) facility.

Company officials said that commitments for the ABL facility are in compliance with agreements the company reached with key stakeholders on April 29 regarding its financial restructuring plan. And they added that YRCW expects to close its restructuring this month.

“Replacing the ABS facility with this new facility should improve the company’s liquidity,” said John Lamar, chief restructuring officer and lead director of YRC Worldwide, in a statement. “That helps support our industry’s seasonal pattern of revenues and provides the financial flexibility and run room we need to grow the business.”

YRCW has lost in excess of $2.7 billion the last four years, reported a $102 million loss in the first quarter on a 5.6 percent rise in revenue to $1.1 billion, compared with a $233 million loss in the 2010 first quarter.

During its first quarter earnings announcement, YRCW said it has engaged Morgan Stanley to arrange a new $400 million asset-based loan facility that CEO Bill Zollars said will “enhance our liquidity and strengthen our balance sheet.”

The company said its latest debt swap plan is supported by more than 95 percent of its senior secured lenders. Under terms of the agreement, shareholders will hold less than 2.5 percent of YRC stock, which has been battered throughout the worst recession to hit trucking companies in more than 70 years.

Also on board with the plan are the Teamsters union, its multi-employer pension plans and all the lenders covered by its asset-backed securitization loan facility. Rank-and-file Teamsters already have ratified a 15 percent wage concession and pension freeze. YRCW will once again this summer begin making pension contributions, albeit at a much lower rate than before. Those payments are expected to cost YRC about $6 million to $8 million a month, compared to the previous $30 million to $35 million a month.

Satish Jindel, principal of SJ Consulting in Pittsburgh, said recently that YRCW’s survival hinges on support from at least three of four constituencies: shippers, employees, debt holders, and stockholders.
 
Lenders have been uncharacteristically patient with YRC, largely because they must feel that they would not be sufficiently compensated in a Chapter 7 liquidation. That’s because of the decline recently in used truck valuations. YRCW has closed terminals and reduced its geographic footprint, which has resulted in a company about one-half the size it was about four years ago. But the company has survived an industry price war led by some of its major competitors, including Con-way and FedEx Freight.
 
Recently, RBC Capital Markets analyst John Barnes called YRCW a “case study in how to survive a downturn.” Already, in losing more than $2.7 billion, YRC has become the biggest money-losing trucking company ever to remain in business.


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