YRC Worldwide asks employees’ help to refinance debt
11/04/2013 6:59 PM
11/04/2013 6:59 PM
Trucking giant YRC Worldwide is asking its employees for help as it tries to refinance $1 billion in company debts coming due in the next two years.
The request came in an Oct. 30 letter from chief executive James Welch that was mailed to employees’ homes.
YRC officials did not respond to requests for comment Monday. The company is set to report its third-quarter earnings Thursday.
YRC officials are to meet today with the International Brotherhood of Teamsters, which represents most of the Overland Park-based company’s 32,000 employees.
Teamsters and other employees surrendered pay and benefits in two corporate restructurings designed to keep YRC out of bankruptcy in the aftermath of the recession.
Welch brought up bankruptcy in his letter — and connected it to employees’ jobs and the refinancing — in asking for help.
“In the past, some companies in our position have simply declared bankruptcy,” Welch wrote. “We have all worked too hard and sacrificed too much to go that route and lose some of the industry’s best jobs. The better path is to refinance the debt before its due dates are upon us.”
YRC owes lenders $400 million in 2014 and $685 million in 2015.
The other key deadline is in March 2015, when the company’s contract with the Teamsters that contains their concessions is set to expire. The question for employees is whether the company asks simply to extend the contract as it stands or seeks further concessions.
Welch’s letter said the new contract would need to be one that “increases our competitiveness” if YRC is to gain the debt refinancing. It did not specify what that would require. His letter also said refinancing the debt would free up cash and help the company compete.
“It gives me flashbacks to 2009,” said David Ross, an analyst at Stifel Nicolaus & Co. Inc.
Ross said he expected YRC to seek additional concessions but was unsure whether it would get them. Each round of concessions has failed to fix the company’s problems, he said.
“At what point does ‘You’re going to lose your job if you don’t give us more’ not work?” he said.
Tuesday’s meeting with the Teamsters will cover YRC’s “recent performance, future prospects (and) corporate refinancing opportunities,” according to a company announcement.
Welch, in the letter to employees, said the company’s finances are consumed by wages, benefits and other operating costs plus the interest on debt. No money is left to reinvest in the business, it said.
Wall Street gets a fresh look at YRC’s performance Thursday when the company releases its third-quarter results.
YRC shares gained 12.5 cents Monday to close at $8.47 but have been falling steadily since mid-September. In July the stock had closed as high as $35.79.
Investors had been disappointed by a costly reorganization of YRC Freight’s network of terminals during the second quarter. The effort cost $6.3 million, involved 10 percent of its terminals and relocated hundreds of employees.
Since then, Welch has taken personal charge of YRC Freight, the company’s national trucking business, after the departure of its president, Jeff Rogers. YRC Worldwide also operates three regional firms, Holland, Reddaway and New Penn.