December 22, 2013 11:45 PM
YRC Nears Deal for $250 Million in New Equity
Financing Conditional on Labor Agreement
By EMILY GLAZER
YRC Worldwide Inc. is close to raising funds to cover upcoming debt payments as the trucking company works to persuade employees to extend their labor contracts for five years, people familiar with the matter said.
The company was expected to make a securities filing Monday morning detailing the financing, which comprises $250 million in equity and at least $25 million in debt committed to become equity and was being provided by several investment firms, the people said. Talks Sunday evening weren't final and could still fall apart, they said.
The expected financing is a step toward addressing YRC's financial troubles and would allow it to pay off debt that is maturing in February, the people said. The company separately is seeking to push back the due date on $124 million of debt due in March 2015.
The Overland Park, Kan., company, which has around 32,000 workers, reached an agreement this month with leaders of the Teamsters union to present a contract-extension proposal to its members. A ratification vote is slated for next month.
YRC's debt troubles trace back to the 2003 merger of Yellow Corp. and Roadway Corp. that created Yellow Roadway Corp. The company took on more debt when it acquired USF Corp. for $1.37 billion in 2005 in an effort to strengthen its regional business. YRC's current brands include YRC Freight, YRC Reimer, New Penn, Holland and Reddaway. YRC avoided a bankruptcy filing by completing a debt restructuring in 2011, followed by further debt amendments since then.
"In the past, some companies in our position have simply declared bankruptcy," YRC Chief Executive James Welch wrote in an October letter to employees. "We have all worked too hard and sacrificed too much to go that route and lose some of the industry's best jobs."
YRC posted $4.85 billion in revenue for last year. The company has roughly $1.4 billion in debt and a market value of about $164 million. YRC's stock fell two cents to close at $14.97 Friday on the Nasdaq Stock Market.
YRC faces a $69 million debt payment in February, a $325 million debt payment in September and a $675 million payment in March 2015. The company's capital is being eaten away by the interest payments it must make on its debt, the people familiar with the matter said.
The new financing and a deal to extend the due date should smooth the path for YRC to refinance debt maturing in 2014 and 2015, the people familiar with the matter said.
But those are conditioned on the company's completion of a deal to extend by five years its existing collective-bargaining agreement with its 26,000 Teamsters. The current contract is set to expire in March 2015. The proposal would extend a 15% pay cut that workers agreed to in earlier contract negotiations.
The ratification process, which is contingent on factors including a significant reduction of debt, should be completed around Jan. 8, YRC has said.
Write to Emily Glazer at emily.glazer@wsj.com
