YRC completes payment plan with largest pension fund

YRC Worldwide Inc. said Thursday that it has a long-anticipated agreement to use real estate as collateral for deferred payments to pension funds.

The Overland Park-based company said it will defer $83 million in payments to the Central States, Southeast and Southwest Areas Pension Fund. The Central States fund is a multi-employer pension fund that represents 58 percent of YRC’s monthly pension obligations.

The agreement allows YRC to put up company real estate as collateral for pension obligations. The company said it is to repay deferred pension contributions during a three-year period beginning in January 2010, with interest accruing monthly beginning July 15. YRC stopped making payments in April as negotiations continued.

YRC also said Thursday that it is working to pull other multi-employer pension funds into the arrangement. The company said it has deferred about $50 million in obligations to these funds.

YRC has said it wants pension reform, with the federal government’s help, because through the multiemployer plans it supports many retirees who never worked for the company, but whose employers went out of business. The plans already have been taking losses as the markets fell. The Central States fund ended 2008 with net assets of $17.3 billion, down more than a third from $26.8 billion at the end of 2007.

As part of the plan to defer pension payments, YRC said it has a deal with creditors that will let it grant second priority liens on property. An amendment to the company’s credit agreement releases $73 million in escrow funds from previous sales of real estates to pay down the company’s revolving credit facility without reducing its ability to draw on that facility.

The company said it has closed on $94 million in real estate sale and sale-leaseback agreements in the second quarter, through June 16. It has another $77 million in transactions under contract. Property sales have been part of the company’s strategy to maintain liquidity as volumes remain weak and it posts losses, including $257.4 million in the first quarter.

“These transactions are especially critical as we continue to face substantial headwinds from the global economic recession,” YRC Chairman and CEO Bill Zollars said in the release. “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.”

At the end of May, YRC had cash and cash equivalents — excluding $61 million in restricted cash — of $155 million, compared to $151 million at the end of April.

YRC said Tuesday that it has accelerated its closing of facilities as part of an integration of its Yellow and Roadway networks. It now expects to be down to 400 facilities by the end of June, rather than by the end of the year, creating an estimated $250 million in annual savings.