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YRC Said to Boost Rate on $700 Million Refinancing Term Loan

Feb. 11 (Bloomberg) -- YRC Worldwide Inc., the U.S. trucker trying to reverse annual losses dating to 2007, increased the rate it’s offering on a $700 million term loan as lenders decide today whether they will participate in the refinancing, according to a person with knowledge of the deal.

The five-year debt will pay interest at 7 percentage points more than the London interbank offered rate, compared with 6.75 percentage points initially proposed, said the person, who asked not to be identified without authorization to speak publicly. The lending benchmark will have a 1 percent minimum, which is unchanged.

Lenders are requiring YRC, which averted bankruptcy in 2011, to pay a spread almost double that of non-bank lenders. The average cost paid on debt sold to investors as of Feb. 6 was 3.72 percentage points above Libor, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data.

The financing will be offered to lenders at 99 cents on the dollar, the person said, and will have call protection of 102 cents and 101 cents, meaning the company would have to pay premiums of two cents and one cent to reprice the loan in the first and second years, respectively. The transaction, led by Credit Suisse Group AG, includes a $450 million asset-backed loan. Commitments are due from lenders today at noon in New York.

YRC, based in Overland Park, Kansas, amassed $1.4 billion in debt from acquisitions and what Chief Executive Officer James Welch has called “numerous missteps” before he took over in 2011.

Annual Savings

At the end of January, the company raised about $300 million to repay debt, including a $69 million note due this month, by selling $250 million of new shares and converting $50 million of bonds to equity.

YRC may save as much as a third from its $150 million annual interest expense with the debt reduction and the new loans, Chief Financial Officer Jamie Pierson said in a Jan. 31 interview.

Loans under a credit pact YRC obtained in 2011 pay interest ranging from 6.5 percentage points more than Libor with a 3.5 percent minimum on the lending benchmark to 9.75 percentage points more than Libor with a 1.5 percent minimum, according to data compiled by Bloomberg.

To contact the reporters on this story: Krista Giovacco in New York at kgiovacco1@bloomberg.net; Thomas Black in Dallas at tblack@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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