YRC Asks Union to Redo Contract for Trucker’s RefinancingThomas Black
YRC Worldwide Inc. surged the most in almost six months as the struggling U.S. trucker sought union contract concessions that Chief Executive Officer James Welch said were critical to helping refinance debt.
“Some companies in our position have simply declared bankruptcy,” Welch told employees in an Oct. 30 letter ahead of a meeting with the Teamsters union leaders today. “We have all worked too hard and sacrificed too much to go that route and lose some of the industry’s best jobs.”
Lenders are demanding a renegotiated labor agreement as a condition for refinancing debt that matures starting next year, Welch wrote. He cited almost $1.4 billion in borrowings from “numerous missteps” at Overland Park, Kansas-based YRC before he became CEO in July 2011, and didn’t specify any givebacks.
The stock jumped 28 percent to $10.84 at the close in New York, the biggest advance since May 6. YRC has posted annual losses since 2007 and twice had to rework credit accords, in 2009 and 2011, to avoid bankruptcy after more than $2 billion in acquisitions. The current contract expires in 2015.
Chief Financial Officer Jamie Pierson declined to comment after today’s gathering between YRC and union chiefs outside Dallas in Irving, Texas. Teamsters officials weren’t available to discuss the session.
More meetings are likely as YRC seeks labor savings to show lenders it can cut costs, Brad Delco, a Stephens Inc. analyst in Little Rock, Arkansas, said in an interview beforehand.
“There’s nothing that can come out of this meeting that says the union is going to accept any sort of concessions,” Delco said.
Suzanne Dawson, a spokeswoman for YRC at LAK Public Relations Inc., declined to comment on the letter. Galen Munroe, a Teamsters spokesman, couldn’t be reached for comment. YRC has about 32,000 employees, a majority of them represented by the Teamsters, according to the company.
The company needs “a labor agreement with our Teamster employees that extends beyond our current expiration and any new debt maturities and increases our competitiveness before any refinancing can be completed,” Welch wrote.
A deal-making spree last decade built YRC into the biggest U.S. trucker before slumping sales during the economic crisis toppled the carrier from that perch. YRC reported $4.85 billion in revenue in 2012, less than half 2006’s peak of $9.92 billion.
YRC has about $396 million of debt maturing next year and another $548 million in 2015, according to data compiled by Bloomberg, while cash and near-cash items totaled $165.9 million at the end of the second quarter. The company is scheduled to report third-quarter results on Nov. 7.
YRC negotiated its current labor agreement in 2010 and reduced wages by 15 percent for most union employees to cut costs, according to a filing with the Securities and Exchange Commission. Those savings will need to be maintained to win any refinancing, Delco said.
“They’ll need some sort of continuation of these concessions for this company to have a chance to fight back out of the leverage hole they’re in,” Delco said. “If the union clawed back everything they had prior to the last concessions, that would not fly.”