Analyst says YRC could close doors this weekend

YRC needs to make a $19 million interest and fee payment on Thursday. It said earlier this month that if it didn't have access to some extra cash by Dec. 31, its "liquidity position would become unsustainable."

The Associated Press

12/30/2009

OVERLAND PARK, Kan. — An analyst said Wednesday that YRC Worldwide Inc., one of the nation's largest trucking companies, could file for bankruptcy and close its doors as early as this weekend despite its effort to complete a critical debt-to-exchange offer.

YRC, based in Overland Park, Kan., extended its offer to bondholders for the sixth time. It now expires midnight Wednesday. The offer is considered a last resort for the company because it will free up much-needed cash. But it would also make current shareholders' stakes virtually worthless.

The company said it made progress in its push to get debt holders to swap their bonds for equity, though it still doesn't have enough. And time is running out.

If YRC does not complete the bond exchange, the company's last chance to avoid bankruptcy is a waiver from its lenders, according to Stifel Nicolaus analyst David Ross. If that doesn't happen, the company could file bankruptcy and close its doors as early as this weekend, Ross predicts.

Company spokeswoman Suzanne Dawson rejected that assumption.

"The company will be open for business as usual on Monday," Dawson said.

But Ross said even if a bankruptcy filing doesn't occur this week, it might not be far away.

"Whether or not the exchange goes through and the interest payment is made, we believe the company may still burn through all of its cash and borrowing capacity in the next two months, as customers are getting increasingly nervous about having their freight stranded in YRC's network," Ross said.

The last time a trucking company about the size of YRC went out of business was in 2002, after Consolidated Freightways filed for Chapter 11 protection. Less-than-truckload carriers like Consolidated and YRC, which consolidate shipments from many sources at company terminals, historically have not been able to keep their doors open after filing for bankruptcy because of their high fixed costs and customer defections.

The Teamsters Union, meanwhile, is calling on the bondholders that are “standing in the way” of YRC’s financial restructuring to take part in the debt-to-equity exchange.

In a Tuesday press release, the union said it believes that hedge funds Brigade Capital Management and JMB Capital Partners, and banks including UBS, Barclays and TD Bank, hold positions and have not tendered.

“All bondholders need to recognize that the livelihoods of 30,000 Teamster members depend on their willingness to take part in the exchange,” said Teamsters General President Jim Hoffa. “The workers, the pension funds, the secured lenders, a majority of bondholders and other stakeholders have made sacrifices and contributed to the restructuring. Now it is time for the remaining bondholders to recognize what is at stake and do their part. The company’s customers need to know there is a light at the end of this tunnel.”

Bondholders have two ways to be helpful, the union said: take part in the exchange or sell to someone that will.

“It is unconscionable that these bondholders are playing chicken with tens of thousands of lives for minimal financial reward, either hoping for a better deal or they have derivative coverage,” said Teamsters Freight Division Director Tyson Johnson. “They need to recognize the sacrifices already made by these workers and the devastating affect a bankruptcy would have on their lives.”

Last week, the Teamsters Union also called upon the Securities and Exchange Commission, state attorneys general, state insurance commissioners and congressional oversight leaders to investigate the activities of bondholders and traders involved in this exchange.

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

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