Downgrade sends YRC stock south

YRC Worldwide Inc.’s stock took a dive Monday after Fitch Ratings Inc. downgraded the issuer default and debt ratings of YRC and its YRC Regional Transportation Inc. subsidiary late Friday and raised the specter of bankruptcy if YRC can’t amend its credit agreements.

Around 10:10 a.m. Monday, stock in Overland Park-based YRC Worldwide was trading at $4.25, down 71 cents, or 14 percent, according to Yahoo Finance.

In a research note Friday, Fitch Ratings said it had downgraded YRC Worldwide’s and YRC Regional Transportation’s issuer default ratings to “CCC” from “B” and their senior secured notes ratings to “C/RR6” from “CCC+/RR6.”

Fitch placed all the ratings for YRC and the subsidiary on “Rating Watch Negative.”

The ratings apply to about $550 milion in notes, a $150 million secured term loan and a $950 million secured revolving credit facility.

“The downgrade of YRCW’s ratings reflects heightened concerns about the company’s prospects in light of ongoing severe weakness in the U.S. freight market, as well as the company’s announcement that it is engaged in discussions with its lenders to revise the leverage covenants in its credit facility and asset backed securitization (ABS) facility agreements,” Fitch said in the note.

The ratings company said the concerns remained despite YRC’s International Brotherhood of Teamsters-memberemployees’ vote Thursdayto approve an amended labor agreement that includes a 10 percent wage cut and suspension of cost-of-living adjustments in exchange for a 15 percent state in the company.

YRC’ssudden stop on Dec. 24of a senior-debt buyback offer probably caused it to end 2008 with “a debt level well above Fitch’s earlier expectations,” Fitch said in the note.

If YRC can’t reach agreement with its bank group to revise the agreements before it files its annual report with the Securities and Exchange Commission, Fitch said, “a year-end leverage level above 3.5 (times) would result in a default on the facilities, which likely would force a near-term bankruptcy filing.”

Fitch said its longer-term concerns about YRC include the company’s debt maturities in 2010. YRC ranks No. 2 on the Kansas City Business Journal 's list of area public companies.