YRCW makes Teamster deal, Wall Street divided
YRC Worldwide said Thursday it has finalized an agreement with a Teamster pension fund under which it will be able to put up real estate as collateral in lieu of pension contributions.
The trucker also reached a deal with lenders to amend a credit agreement with its lenders, and said it is continuing to close of sale and leaseback deals.
Bill Zollars, chairman, president and chief executive officer, said the announcements were “important milestones, which are part of our overall strategy to provide us with greater financial flexibility during the economic recession, giving us additional liquidity and the ability to use our cash to support the business.”
Wall Street analysts who follow the trucker are divided on its prospects.
Jon A. Langenfeld of R.W. Baird published a research note Thursday in which he downgraded the company’s stock from “neutral” to “underperform,” and said there was an increasing likelihood of a YRCW bankruptcy within nine months.
“While a YRCW bankruptcy may take several months or quarters to play out, recent trends suggest that the outcome will eventually occur,” he wrote.
But Jason H. Seidl of Dahlman Rose & Co. wrote: “Although YRCW is not even close to being out of the proverbial woods, this takes them out of danger for immediate bankruptcy in our opinion.”
Dow Jones quoted Zollars as saying bankruptcy is “not even on our radar screen.”
The company’s stock fell about 5.5 percent to close at $2.05 per share. At one point during the day it traded as low as $1.71.
The company said the estimated payment deferral to the Teamsters Central States, Southeast and Southwest Areas Pension Fund is about $83 million and calls for repayment of the contributions over three years beginning in January 2010. The deal covers about 58 percent of the company’s monthly pension funding obligations.
YRC Worldwide is also finalizing discussions with its other Teamster pension funds to join as participants in this same agreement. It had deferred about $50 million related to these other funds.
In addition, YRC Worldwide announced that it finalized an amendment to its credit agreement with its lenders that permits the company and its subsidiaries to grant second priority liens on certain owned real estate in conjunction with the pension deferrals. The amendment also releases escrow funds of $73 million, generated from the company’s prior real estate transactions, to pay down the revolving credit facility without reducing the company’s borrowing availability under the facility.
The company noted that it continues to close on its sale and financing leaseback agreements, with $94 million closed quarter-to-date through June 16. The company expects to close about $77 million of additional sale and financing leaseback transactions that are under contract. On its Web side YRCW said it closed $158 million in the first quarter.
“These transactions are especially critical as we continue to face substantial headwinds from the global economic recession,” Zollars said. “Today’s announcement marks important milestones, which are part of our overall strategy to provide us with greater financial flexibility during the economic recession, giving us additional liquidity and the ability to use our cash to support the business.”
In its latest update to customers, YRCW said liquidity was well above the $100 million covenant and no significant debt mature until April 2010. The company has set up a special Web page for customers.
The company grew out of the 2003 acquisition by Yellow Corp. of Roadway Corp. and today does business under the national brands RC, and various regional brands such as YRC Reimer, YRC Logistics, New Penn, Holland, Reddaway and YRC Glen Moore.
Baird said between its national and regional arms, YRCW is the largest less than truckload carrier, with an 18 percent market share, compared to FedEx with 12 percent, Con-way with 9 percent, Arkansas Best Corp., with 5 percent and Old Dominion Freight Line with 4 percent. It notes those companies are likely to gain market share in the event of a YRCW bankruptcy. ' Chris Dupin