YRC says downgrade forces collateralization moves

On Wednesday, Standard & Poor’s cut YRC’s debt rating three notches, citing the company’s ability to comply with terms of its borrowing because of falling profits. YRC Chairman and Chief Executive Bill Zollars called the downgrades "disappointing."

The Associated Press

11/20/2008

OVERLAND PARK, Kan. — Trucking company YRC Worldwide Inc. said Thursday that ratings downgrades will require the company to collateralize its real estate and revenue equipment, which it valued at $1.5 billion.

On Wednesday, Standard & Poor’s cut YRC’s debt rating three notches, citing the company’s ability to comply with terms of its borrowing because of falling profits.

YRC said the downgrade to “B” from “BB” was considered a trigger event under its credit agreement, requiring it to collateralize remaining unencumbered assets, mostly real estate and equipment.

The company estimated one-time fees of collateralization would be $7 million to $10 million.

YRC said it can still enter into sale and leaseback transactions, dispose of excess facilities and complete debt-for-debt exchanges.

The S&P downgrade followed a similar move by Moody’s Investors Service, which last week lowered its ratings for YRC to “B1” from “Ba2,” and characterized its outlook as “Negative.” Moody’s cited weakness in the company’s regional operations and exposure to the troubled U.S. auto industry.

“It is unfortunate that the economic environment and financial markets are causing these types of reactions,” Chairman and Chief Executive Bill Zollars said. He said the “disappointing downgrades” don’t change the company’s plan to combine units.

In morning trading, shares of YRC Worldwide fell 35 cents, or 19.4 percent, to $1.45 after hitting a 52-week low of $1.20 earlier in the session.

Kevin Jones of The Trucker staff can be reached for comment at kevinj@thetrucker.com.