YRCW releases update on company’s restructuring plan

Less-than-truckload (LTL) transportation services provider YRC Worldwide (YRCW) said yesterday that it has reached an agreement in principle with key stakeholders for a comprehensive restructuring plan.

Company officials said that this agreement, which is the 20th amendment to YRCW’s credit agreement, was made in the form of a non-binding term sheet and approved by the parties necessary to satisfy the agreement in principle condition in the company’s credit agreement. These parties include the Teamsters National Freight Industry Negotiating Committee and a more than two-thirds majority of the lenders under the company’s credit agreement.

YRCW added that this non-binding term sheet provides YRCW with new and additional capital, a substantial improvement in its liquidity position, conversion of some debt obligations into equity and the replacement or restructuring of certain debt obligations.

“[T]he principal objective of the company was to achieve a comprehensive restructuring with a solid foundation for long term success,” said John Lamar, chief restructuring officer and lead director of YRCW, in a statement. “I believe the agreement in principle as represented by the term sheet will do just that. We appreciate both the support and confidence of our lenders and the dedication and sacrifice of our thousands of employees in their efforts to support the future success of YRCW.” 

According to the term sheet, a timeline has been established to close the restructuring transaction by this July and contemplates the extension of the previously announced deferral of interest and fees under YRCW’s credit agreement and ABS facility for the same timeframe. And it added that YRCW’s lenders have waived the first quarter 2011 EBITDA covenant in view of harsh winter conditions. The term sheet also requires that an acceptable to all parties must be completed by April 29, rather than the original March 15 deadline.

“YRCW’s recent results showed necessary operating performance improvement and stabilized cash burn, both crucial trends to ensure near-term survival,” wrote Jon Langenfeld, Robert W. Baird analyst, in a research note. “Additionally, industry demand and yields are improving. However, YRCW still faces meaningful challenges. Though industry volumes have firmed and YRC Regional’s volume growth has resumed, the company continues to lose market share on an overall basis given YRC National’s continued volume contraction. Further, we do not view the current cost structure as sustainable given the cumulative 15% reduction in wages, $80 million quarterly pension concession, and $20-25 million quarterly interest payment deferral.

In its fourth quarter earnings call earlier this year, YRCW reported net income of $23.1 million—of $0.49 per share. This falls short of the fourth quarter of 2009, when YRCW reported net income of $119.5 million, which included a $177 million after-tax gain on debt redemption. Despite the quarterly gain in net income, YRCW reported a net loss of $322 million and $8.13 per share for all of 2010.
The fourth quarter marked the fifth consecutive quarter of year-over-year earnings improvement, according to YRCW. And its consolidated results included positive EBITDA for the third straight quarter and positive operating cash flow for the second half of 2010.

“We are encouraged with the continued year-over-year improvement in our operating performance, as we remain focused on our three key initiatives: disciplined pricing, customer mix management, and cost improvement, said YRCW Chairman, President, and CEO Bill Zollars on an earnings conference call in February

Zollars also said that YRCW is in active discussions, regarding the company’s balance sheet recapitalization.

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