YRC around the world Inc.
Lenders have given the struggling trucker a three-and-a-half-year reprieve on its heavy debt load as the company prepares for a $700 million federal bailout.
The Overland Park, Kansas-based freight carrier said in a securities filing on Wednesday that its lenders had agreed to extend the maturity date of a loan facility through 2024, and to extend and ease further certain requirements on a term loan of approximately $580 million from a group led by affiliates of
These agreements were negotiated while YRC was working on the terms of a planned federal loan of $700 million announced last week, Jamie Pierson, YRC’s chief financial officer, said in an interview.
In total, the deals give YRC “three and a half years to focus on the business, with no deadlines,” Pierson said. “It’s a new day. We just have to not blow it up.
YRC, the fifth-largest trucking company in the United States by revenue, according to SJ Consulting Group Inc., carries some $880 million in long-term debt and was struggling to turn around its operations when the coronavirus pandemic hit. hit, dealing a blow to his case. The Treasury Department loan, thanks to a provision of the $2.2 trillion coronavirus stimulus bill, will over time nearly double its indebtedness to about $1.6 billion, Mr. Pierson.
Trucker plans to use $300m tranche of government loan to repay health, retirement and other obligations, and for working capital, Pierson said. According to the filing, an additional $400 million will go toward purchasing new trucks and trailers for YRC’s aging fleet. This loan will mature on September 30, 2024.
YRC does not expect to repay the debt over the term of the loan, but rather intends to repay or refinance it when it matures, Pierson said.
“We’re going to take every penny we can and put it back into this business, and invest in the fleet and rolling stock,” he said, which will reduce the cost of running the business. Purchasing new trucks will save YRC between $10,000 and $12,000 per tractor “on maintenance alone”, he said. This is “not only to refresh the fleet, but also to have additional cash to run the business”.
YRC serves large retail shippers such as
Home deposit Inc.,
with automotive and industrial customers. The company generated $4.87 billion in operating revenue last year, but has long struggled with heavy debt and pension liabilities for its largely unionized workforce.
As part of the federal loan agreement, YRC has agreed to issue about 15.9 million common shares to the Treasury Department, according to a securities filing on Tuesday, giving the government a 29.6% stake in the business and diluting the shares of existing investors. Those shares will be turned over to a voting trust, and once a one-year holding period has expired, the government is free to sell or hold the shares as it sees fit, Pierson said.
The boost from the government loan will offset the dilution in existing investors’ shares “in spades”, Mr Pierson said. “The company’s market value has increased…since the deal was announced.”
Write to Jennifer Smith at [email protected]
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