Shares of YRC Worldwide Inc. dropped as much as 21% in a volatile session Thursday after the trucker reported plans to defer pension payments in what an analyst called part of an effort to avoid bankruptcy, though YRC said bankruptcy is not something it's considering.
YRC said in a release Thursday it reached an agreement with its pension fund to defer $83 million in payments. It also amended its credit facility to allow for the deferments. As of March 31, the company said it had $1.4 billion in total debt.
Stifel Nicolaus analyst David Ross said the news isn't really unexpected as the company has been doing whatever it can to raise and conserve cash.
"It's something else they're trying to stay afloat," Ross told Dow Jones Newswires, adding that whenever a company defers pension payments and does sale leasebacks, those actions are more of a "last-ditch effort."
"They're losing a ton of business, not making any money and trying to raise cash however they can, whether through deferring pension or selling real estate and leasing it back," Ross said. "The question is how long they can do this."
Chief Executive Bill Zollars told Dow Jones Newswires that bankruptcy is "not even on our radar screen" while acknowledging the pension changes announced Thursday are a short-term fix.
"The longer-term fix, we think, has to do with legislation to get the orphans off our payroll, so to speak," Zollars said, referring to the multiemployer union pension funds to which YRC contributes.
Zollars has long objected to YRC's financial obligations under the plans, saying that about half of its contributions pay for retirees who never worked for YRC but rather worked for other companies who have gone out of business.
Earlier this month, YRC said it wouldn't seek federal bailout funds, a move it had been considering to address its pension problems. Zollars said Thursday that the talk about applying for funds was mainly a way to "start the discussion" about multiemployer pension fund changes.
Zollars added that it's difficult to predict what kind of legislation could be introduced or passed but that he believes there's potential for changes.
"We think the timing is right for addressing multiemployer plans and single employer plans out there," Zollars said, adding that the company is working with a variety of people in a "fairly comprehensive approach."
In recent trading, shares were down 14.7% to $1.85 after earlier falling as low as $1.71. Shares traded higher for a time Thursday, up as much as 7.4% to $2.33. They have lost nearly 90% of their value in the past 12 months as fears about the company's substantial debt load weigh on shares. Full Story......