YRC Worldwide Inc. (YRCW), buoyed by its union accepting concessions, set the rate on a portion of loans as part of the trucker’s $1.4 billion refinancing plan to avert bankruptcy, a person with knowledge of the transaction said.
The $700 million term piece may pay interest at 6.75 percentage points more than the London interbank offered rate, with a 1 percent minimum on the lending benchmark, said the person, who wasn’t authorized to speak publicly and asked not to be identified. The debt, due in five years, will be offered to lenders at 99 cents on the dollar.
Teamsters members voted 66 percent in favor of a four-year contract extension until 2019 that includes maintaining cuts of 15 percent in pay and 75 percent in pension contributions. Creditors had demanded savings as a condition for refinancing YRC’s debt, the Overland Park, Kansas-based trucker has said.
“It’s a reset for the company,” Chief Executive Officer James Welch said by telephone late yesterday after balloting ended. “We’ve been working on this strategic process for a year to pay down the debt and to achieve a lower interest payment, and the labor agreement was the key ingredient.”
Welch declined to say how much the revised labor agreement will save the trucker, or to discuss YRC’s next steps for refinancing. YRC now pays a 10 percent coupon on its $258 million of convertible bonds that mature in March 2015.
The new transaction includes a $450 million asset-backed loan, the person said. Credit Suisse Group AG, which is leading the transaction, will host a lender call at 2 p.m. tomorrow in New York, the person said. Lenders must submit commitments to the bank on Feb. 11.
YRC’s $298.7 million term loan due in March 2015 rose about 1.44 cents today to 99.31 cents on the dollar, from 97.88 cents on Jan. 24, according to prices compiled by Bloomberg.
The shares fell 6.6 percent to $17.55 at the close in New York, paring their year-to-date gain to 1 percent. The stock more than doubled in 2013.
The company is rushing to complete the refinancing before a $69.4 million bond matures on Feb. 15. YRC told union employees ahead of the vote that it couldn’t make payments due in September without new financing and said companies in similar straits have declared bankruptcy.
YRC amassed $1.4 billion in debt from acquisitions and what Welch called “numerous missteps” before he took the job in 2011. Losses have exceeded $3.1 billion since 2007, including an estimated adjusted loss of $102 million in 2013, after YRC bulked up with deals to become the biggest U.S. trucker.
In December, YRC reached an accord with some investors and creditors to reduce debt by $300 million through issuing $250 million of new shares and converting $50 million of bonds to shares. That agreement was contingent on the labor contract extension. YRC also said it was planning to seek $1.15 billion of loans to refinance the remaining debt.
The refinancing plan hit a snag earlier this month after union members voted 61 percent against a previous concessions package that would have saved YRC $100 million a year. YRC, which operates about 15,000 trucks daily, negotiated a second vote on a reworked accord that Welch called “the best -- and only remaining -- path forward.”
In yesterday’s vote, 18,581 ballots were cast, and 12,267 favored the proposal, the Teamsters said. YRC has about 26,000 union workers.
The Teamsters will hold YRC management’s “feet to the fire” to make sure the company’s finances are handled properly after union members accepted more sacrifices, said Teamsters General President Jim Hoffa said in a statement.
“This was a very difficult vote for our members, but in the end they did what they believe will give this company the best chance to stay in business and protect their jobs,” Hoffa said.
Besides maintaining the pay and pension-contribution cuts, Teamsters agreed to givebacks including delays in raises and reduced vacation time.
As of Sept. 30, YRC had about $170 million of cash to face a $69.4 million bond issue that matures on Feb. 15, according to data compiled by Bloomberg. The company has $325.5 million of loans due in September and $556.7 million of loans and bonds maturing in March 2015.