YRC Worldwide Inc. (YRCW)’s shares may
plunge for a second day after union workers rejected a labor
agreement yesterday that the trucker has said was required to
refinance more than $1 billion of debt and stave off bankruptcy.
YRC’s Teamsters voted 61 percent against a contract
extension into 2019 that retained a 15 percent wage cut and
contained concessions including giving the company more
operating flexibility such as hiring third-party trucking
services and cracking down on absenteeism. Out of about 26,000
YRC union workers, 19,651 ballots were cast, the union said.
“It’s not going to bode well for any equity holders of the
stock,” said Brad Delco, a trucking industry analyst with
Stephens Inc. in Little Rock, Arkansas. “I don’t think it’s
over, but it definitely makes things significantly more
Chief Executive Officer James Welch has said the future of
Overland Park, Kansas-based YRC depended on the union supporting
the labor concessions, a condition for lenders to agree to
refinance $952 million of bonds and bank loans maturing by March
2015. In an Oct. 30 letter to union workers, he said some
companies in YRC’s position have declared bankruptcy.
The shares fell 20 percent to $12.60 in late trading
yesterday. Shortly after the New York close and before the
voting results were released, YRC dropped 16 percent, the
biggest decline in eight weeks, after a union splinter group
said the company’s proposal may fail. The stock more than
doubled in 2013.
YRC amassed $1.4 billion in debt from acquisitions and what
Welch called “numerous missteps” before he took the job in
2011. The company has posted profit losses of more than $3.1
billion since 2007, including a projected loss of $100 million
“Our members have sacrificed billions of dollars in wages
and pension benefits over the past five years and yet the
company has been unable to recover from the disastrous policies
of the previous management,” Jim Hoffa, Teamsters general
president, said yesterday in a statement.
As of Sept. 30, the company had about $170 million of cash
to face a $69.4 million bond issue that matures on Feb. 15. The
company has $325.5 million of loans due in September and $556.7
million of loans and bonds maturing in March 2015.
“Despite the vote results, it is business as usual as we
have approximately 15,000 trucks on the road today serving
250,000 customers,” Welch said yesterday in a statement.
The company had reached an accord with some investors and
creditors that would have reduced debt by $300 million with the
issue of $250 million of new shares and converting $50 million
of bonds to shares. That agreement hinged on union workers
accepting the labor proposal.
Welch said many union workers who mailed in their votes
early may have supported the company’s proposal after learning
of the $300 million debt-reduction agreement announced on Dec.
“Many employees had already returned their ballots prior
to Dec. 23,” Welch said in the statement. “We believe that was
information employees needed to make a fully informed
The company had scheduled a meeting with lenders today in
New York to discuss a $700 million loan and $450 million of
asset-backed financing to refinance its high-cost debt. A
spokeswoman representing the company said she didn’t know
yesterday after the voting results if that meeting would still
Lack of Liquidity
Without the labor agreement, “we may be unable to
restructure or refinance the portions of our debt which will
mature in September of 2014 and March of 2015,” YRC said in a
Dec. 10 filing. “If we are unable to restructure or refinance
our maturing debt, we will not have sufficient liquidity to
repay the amounts owed.”
The refinancing and debt reduction would have saved YRC as
much as $50 million of annual interest payments, putting the
company on the road to profitability, said Chief Financial
Officer Jamie Pierson in a Dec. 23 interview.
YRC’s bonds have gained over the past year as investors
grew more confident the company would be able to refinance its
debt. The company’s $179.1 million of 10 percent notes maturing
March 2015 last traded at 98.3 cents on the dollar on Jan. 7,
according to Trace, the bond price reporting system of the
Financial Industry Regulatory Authority. That’s up from a 12-month low of 29.5 cents on the dollar on Jan. 31, 2013.
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Thomas Black in Dallas at
To contact the editor responsible for this story:
Ed Dufner at