Lenders ease YRC Worldwide’s liquidity requirement

YRC Worldwide Inc. and its lenders have finalized another credit agreement amendment, signaling continued support of the trucking giant through financial losses.

Overland Park-based YRC wrapped up the agreement with JPMorgan Chase Bank N.A. and other lenders on Friday, according to a Monday filing with the Securities and Exchange Commission. The agreement maintains a $950 million credit facility for YRC and a senior loan of about $111.5 million, but it suspends until Oct. 13 a requirement that YRC always have liquidity of $100 million or more. It also puts off until Oct. 12 the prepayment of outstanding revolving loans from the proceeds of real estate asset sales; half of any prepayment will increase the revolver reserve amount.

On Aug. 31, the revolver reserve amount was about $100 million; it was not increased by the first $50 million of net cash YRC got from selling real estate since July 30.

The amendment also allows YRC to sell certain property for as much as $400 million in net cash proceeds.

Lenders had to rework credit agreements as a condition of the International Brotherhood of Teamsters’ acceptance of an extra 5 percent pay cut and forfeiting 18 months of pension payments. Most union workers agreed to the concessions early this month.

YRC reported a $309 million loss in the second quarter, coming on the heels of a $257.4 million first-quarter loss.

The company has taken steps that include selling property, integrating subsidiaries, closing facilities, laying off workers and repeatedly amending agreements with lenders in an attempt to maintain liquidity and ride out the recession.

Freight volume: Tough times may be receding

Though the slump in freight volume is expected to continue for the rest of the year, many transportation providers believe the toughest stretch may now be in the rearview mirror. And if the downturn removes weaker competitors from the playing field, some companies believe that may open up opportunities for growth and market share gains.

"I do not foresee a significant change in the current freight environment as we move through the third quarter. However, there has been a slight improvement in volume trends,” said Henry Gerkens, president & CEO of Landstar System in the carrier’s second quarter earnings report.

“In addition, some of the very difficult revenue comparisons experienced during the first half of 2009 begin to ease toward the end of the 2009 third quarter and into the 2009 fourth quarter,” he noted. “I believe the worst is over.”

That being said, however, Gerkens stressed that there continues to be some level of uncertainty in the marketplace. He noted Landstar’s revenue continued to be negatively impacted by the severe recession in the domestic and global economies during the second quarter, with earnings shrinking to $17.9 million on revenues of $491.2 million, compared to $29.8 million in earnings on revenues of $697.7 million in the same period last year.

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Teamsters union may modify agreement with YRC

The International Brotherhood of Teamsters union said on Friday it was forming a committee to determine whether it should modify its national freight labor agreement to help trucking firm YRC Worldwide Inc weather the current industry downturn.

The move was a response to YRC's request to defer pension contributions to preserve cash, the Teamsters said. YRC is the No. 1 U.S. trucking company.

"We are forming this committee to review the contract in efforts to help YRCW survive this recession and hopefully come out stronger than ever," Jim Hoffa, Teamsters general president, said in a statement.

Union members would have to approve any proposed changes to the Teamsters' national freight agreement.

YRC, which has been shedding jobs and closing facilities to cut costs in the face of the U.S. recession, faces an estimated $2 billion in pension obligations over the next four years.

Last month, the company said it would seek $1 billion in bailout money from the Troubled Asset Relief Program to help it cover pension obligations, a move analysts said was unlikely to succeed because the company has no financial charter.

In April, YRC received approval from its creditors to use real estate as collateral for the $30 million to $35 million a month the company says it needs to pay to meet its pension obligations.

YRC Worldwide will spend as much as $100M to buy back senior notes

YRC Worldwide Inc. will offer starting Tuesday to buy back senior debt for as much as $100 million in cash.

In a release after the market closed on Monday, the Overland Park, Kan.-based company said it will offer to buy back its 5 percent and 3.375 percent contingent convertible senior notes due in 2023 and its 8.5 percent senior notes due in 2010. The company said it had drawn on its senior credit facility to finance the purchases.

YRC said it expects to buy at least $230 million of the notes, which would reduce its debt by at least $130 million. To the extent the principal amount of the purchased notes exceeds the amount paid, the company said it will recognize the difference as a gain on extinguishment of debt and include it in the company’s earnings before interest, taxes, depreciation and amortization under the debt-to-EBITDA leverage ratio in the company’s credit agreement.

“This is another proactive measure that we are taking to reduce our debt and improve our earnings,” Chairman and CEO Bill Zollars said in the release. “Given the deteriorating economic environment, we have implemented a comprehensive program to improve our competitive position, increase our profitability and enhance our financial condition.”