Moody's cuts YRC Worldwide's debt rating

Plans by YRC Worldwide to offer to buy back all of its publicly traded debt for an average of less than 50 cents on the dollar prompted Moody's Investors Service on Friday to downgrade the trucking firm's debt ratings.

Moody's took YRC's corporate family rating to "Caa1" from "B1", and cut its probability of default rating to "Ca" from "B1".

The rating outlook is developing, Moody's said.

On Thursday YRC said it would tender to buy back up to $537 million in principal on senior notes issued by it and subsidiary YRC Regional Transportation.

Moody's said the offer amounts to an average of about $475 for every $1,000 in debt.

The ratings service said it "views the tender, which is being offered at a deep discount to par, as a distressed exchange."

If YRC is successful with the tender offer, Moddy's said it will have used nearly all of its bank credit facility, which it will then need to refinance in 2012.

YRC shares fell 13 cents, or 2.4 percent, to close at $5.24 on Friday.

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.”