YRC seeks new credit terms
Trucking company YRC Worldwide said on Christmas Eve that it was negotiating with a group of banks to ease terms on lines of credit and that it has terminated a $150 million cash buy back of senior notes at a discounted price to improve liquidity.
The largest U.S. less-than-truckload carrier said it expected to complete talks with banks on amending its credit facility by late January, with a key goal to change debt-to-earnings ratio requirements in order to comply with loan agreements for this year.
YRC, based in Overland Park, Kan., also said it has cancelled a tender offer to purchase principle on the notes because a recent wage reduction agreement was not ratified by the Teamsters union in time to meet the Dec. 23 tender deadline. In exchange for reducing wages 10 percent, union workers will receive 15 percent equity in the company.
The company said it expected the union to ratify the amended labor agreement before the year runs out, but the Teamsters said Dec. 27 that it has extended the ratification deadline until Jan. 6. The original ratification was set for Dec. 31, but the union said it is taking advantage of the canceled tender offer to allow more time due to holiday mail volume, bad weather and high volume of ballot requests.
'Given the economic uncertainty, we believe it is more productive to pursue a revised arrangement with our banks as an alternative to completing the tender offer,' Bill Zollars, chairman and CEO of YRC Worldwide, said. 'We continue to have good relationships with our banking group and are confident that we can work out a mutual agreement that provides flexibility in our leverage ratio while improving our liquidity position.'
YRC has more than $250 million in cash and expects to improve its position from the sale and leaseback of excess terminals, while also substantially reducing equipment purchases due to the integration of its flagship long-haul units Yellow Transportation and Roadway.
The trucking and logistics conglomerate said it has closed or consolidated about 80 freight hubs and expects to complete the integration and consolidation of 450 terminals by early spring.
The economic downturn has battered the trucking industry for more than two years and conditions are only getting worse for many carriers. YRC said its fourth-quarter tonnage through November, compared with 2007, is down a breathtaking 11 percent for its long-haul group and 11.8% for its YRC Regional group.
Meanwhile, Moody's Investor Services downgraded YRC Worldwide's credit rating to 'negative' based on its debt and industry challenges.
'With the termination of the tender offer, which would have reduced much of the company's senior notes outstanding, and with a significant portion of the company's senior credit facility drawn, YRC's debt levels have increased materially over the past two quarters,' the ratings agency said. 'At the same time, fundamental operating conditions have deteriorated in the trucking sector, which are expected to have a continuing negative impact on the financial performance of YRC over the near term.'
YRC's shares lost a fifth of their value on Friday to close at $2.64 per share in Nasdaq trading. ' Eric Kulisch