YRC restructures debt repayment through 2016

The LTL trucking company secured an agreement that amends its debt covenant to lenders.    The less-than-truckload carrier YRC Worldwide on Tuesday said it had secured a new credit agreement that amends its debt covenant to lenders from the third quarter of 2014 through the end of 2016.
   Specific terms of the revised credit repayment deal were not disclosed.
   “The company has seen numerous debt covenant breaches over the last seven or so years, so flexibility of lenders came as no surprise to us, especially as the company has improved significantly under the aegis of James Welch and Jamie Pierson,” the investment bank Stifel said in an investor note Wednesday. “While we believe that shareholders will feel reassured by this news, we continue to feel that longer-term competitive advantages remain scarce.”
   In announcing the new credit agreement, YRC also increased its operating-margin projections for the third quarter of 2014. The carrier is now expecting adjusted earnings before interest, tax, depreciation and amortization of $75 million to $80 million, above the previous projection of $62 million.
   “The bigger news for us was that 3Q14 results should be better than we expected, implying that more of the lingering costs associated with the 2Q14 freight surge has been worked off than we thought,” Stifel said. “We believe that 3Q14 volumes should be decent (although likely trailing peers), and that pricing momentum should continue as long as the industrial economy continues to be strong.”
   YRC Chief Executive Officer James Welch said the debt restructuring allows the carrier “to take uncertainty out of the market and to allow the company to continue making progress on its performance and yield improvement plans.”
   “During the first half of the year, revenue has kept pace with our forecast, however, the harsh winter season in the first quarter of this year and subsequent network inefficiencies at YRC Freight in the second quarter of this year resulted in lower than originally anticipated productivities,” Welch said. “And the rate of improvement at YRC Freight is taking longer to materialize than expected. The regional carriers, on the other hand, continue to perform near expected levels and in the range of the market’s margins.”