YRC Rallies as Union to Vote on Cuts to Refinance Debt
YRC Worldwide Inc. (YRCW), the trucker seeking worker concessions to help refinance almost $1 billion of debt, rose the most in four weeks after the Teamsters union agreed to vote on the givebacks next month.
Union balloting will conclude Jan. 8, with results due “soon thereafter,” according to a statement today from Overland Park, Kansas-based YRC. The Teamsters said Dec. 6 that union local chiefs had agreed to the ratification vote.
YRC Chief Executive Officer James Welch said he’s confident most union workers will support the agreement because it’s designed to minimize the impact on salaries while maintaining health benefits that are among the best in the industry.
“I have to believe that a majority of our employees understand that if they’re going to stay in this business, these are as good as jobs as they’re going to get,” Welch said in a telephone interview. “This would put us on a much better road than the company has been on in probably eight or 10 years.”
YRC has asked its 26,000 union employees to extend into 2019 a labor accord that had cut wages by 15 percent and is seeking more operating flexibility to satisfy creditor demands for refinancing debt. YRC piled up $1.4 billion in borrowings from acquisitions and what Welch has called “numerous missteps” before he took the job in 2011.
YRC gained 18 percent to $10 at the close in New York, the largest daily increase since Nov. 11.
A $69.4 million bond issue matures on Feb. 15. As of Sept. 30, the company had about $170 million of cash. YRC has $952 million of bonds and loans that mature in the next 15 months, according to data compiled by Bloomberg. Welch declined to comment about if the company has enough cash to pay the bond due in February without a refinancing agreement.
The labor agreement will reduce vacation time for some workers, cut the starting salary for new employees and allow for subcontracting a limited amount of transportation services to combat a driver shortage. The labor accord also calls for a crackdown on absenteeism, which costs the company $40 million a year, YRC said.
The savings from the labor agreement will be about $100 million a year, Welch said. He declined to say how much the company expects to save from lower interest payments after the debt refinancing.
“We worked hard to try not to impact the employees from a wage standpoint,” said Welch, who held three televised town hall meetings with 4,000 participants to explain the agreement. “We tried to put more emphasis on flexibility and being more nimble.”
YRC has posted annual losses since 2007. Last month, the company reported a third-quarter net loss of $44.4 million, compared with net income of $3 million a year earlier.
In a Dec. 3 filing, YRC said it entered into an agreement with MLV & Co. to be the sales agent for an offering of as many as 3 million shares. YRC said it would use the proceeds to pay part of the principal on its bonds that mature in February.
Welch said the union vote and the talks with creditors are part of a rescue plan he’s been implementing since taking over the company.
“It’s not like we’re panicked running around with our hair caught on fire,” he said. “We’re just trying to execute a plan that we’ve had in place for a long time.”
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