YRC offers update on turnaround efforts

YRC Worldwide Inc. has been consulting with turnaround firms and financial advisers to help it come up with a plan for weathering the recession.

The Overland Park-based trucking company late Wednesday offered an update about its work to position itself to ride out the economic downturn. The release followed a trading day in which YRC stock prices plunged 28 percent to a 52-week low of 89 cents, compared with a previous low of $1.20. Also Wednesday, an analyst said bankruptcy remains likely for YRC in the near to midterm.

Several months ago, YRC said, it retained financial advisers that include Tenex Capital Management, Alvarez & Marsal and Rothschild Inc. to help form a “comprehensive strategic plan to address its capital structure and liquidity needs.” As part of that, Rothschild has started preliminary talks with several parties that hold significant portions of YRC’s debt securities.

Labor agreement negotiations with the International Brotherhood of Teamsters union are continuing and “remain productive,” the release said. The talks reportedly center around YRC ending its participation in union pension plans for 14 months, which would yield about $500 million in savings.

YRC also detailed other progress it has made in recent months, including integrating its Yellow and Roadway networks into YRC to cut costs, a bank agreement amendment that let YRC use $73 million in escrow funds from asset sales to pay down its revolving credit facility and progress on agreements to defer pension fund payments using company real estate as collateral. YRC reached an agreement to defer $83 million in second-quarter pension contribution payments with the largest pension fund in June; since then, seven other funds have entered the same agreement, bringing deferral of another $11 million in payments. YRC, which contributes to 36 multiemployer pension plans, still is in talks with the remaining funds.

“We can’t control the economic environment, but we certainly can and are controlling our response to it,” YRC Chairman and CEO Bill Zollars said in the release. “Our self-help recovery plan is proactive and has the support of our stakeholders. We are taking the steps needed to manage our plan today, and position our company for success as the economy recovers.”

For Sale: One Trucking Company's Headquarters. Not Its Business.

Implications

YRC Worldwide, which has been closing terminals and selling others to raise cash, has solid its Overland Park, Kan., headquarters for $22.5 million to a group of Kansas City investors. The motive for the sale is similar to what YRC has been doing elsewhere in its operations. Desperate for cash to avoid running aground of its debt covenants, YRC is using the cash to "enhance its liquidity position," according to an e-mail from the company to the Kansas City Business Journal, which broke the story.

Analysis

What do you do when almost nothing else has worked? Sell the building.

That's exactly what YRC Worldwide, the financially troubled $8.9 billion trucking conglomerate, has done with its Overland Park, Kan., headquarters.

In a sale-leaseback arrangement disclosed by the Kansas City Business Journal, YRC could gain as much as $22.5 million from the sale of its 30-year-old building on the outskirts of Kansas City.

The local Johnson County tax office lists the property's appraised value at close to $25 million, according to the business newspaper.

YRC won't be vacating the premises. Instead, it will lease back at least part of the building for an undisclosed fee.

On this score, YRC has torn a page out of the playbook of the International Brotherhood of Teamsters union (IBT). A few years ago, when the IBT finances were in a shambles, the union mortgaged its so-called "Marble Palace" headquarters with its million-dollar view of the U.S. Capitol building in Washington, D.C.

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YRC sees up to $185 mln in charges; stock plummets

U.S. truck firm YRC Worldwide Inc said on Tuesday it expects to report first-quarter charges of up to $185 million due to ongoing restructuring of its network and the faltering U.S. economy, sending its shares down 20 percent.

In a regulatory filing with the U.S. Securities and Exchange Commission, YRC said the charges include severance pay and pension settlements.

The Overland Park, Kansas-based company also said that daily freight tonnage in its U.S. national network was down 29 percent in the first quarter from a year earlier.

The U.S. trucking sector has suffered from weak freight volumes since the third quarter of 2006 due to a combination of weak retail and auto sales, the meltdown of the housing sector and the decline of the overall economy.

This has forced truckers to slash prices to compete for business.

YRC has had additional problems of its own because of over-capacity in its network following a couple of big acquisitions in 2003 and 2005.

The company has slashed jobs, closed facilities and its unionized workers agreed to more flexible conditions. They approved a 10 percent wage cut in January in return for 15 percent stake in the company.

In February the company also finalized an amendment with its lenders on its credit facilities, a step seen by analysts as crucial to avoiding collapse.

In its filing on Tuesday, YRC said it expects to have 400 facilities by the end of 2009, compared with 521 at the end of 2008.

The company plans capital expenditures of $130 million, and said they could reach a maximum of $150 million.

YRC said it still expects to raise around $100 million in excess property sales in 2009, with $18 million raised in the first quarter.