YRC Teamsters Vote on Pact
This story appears in the Jan. 6 print edition of Transport Topics.
The results of a contract-revision vote by YRC Worldwide Inc.’s Teamsters employees are expected this week as the company seeks to nail down a related deal to raise $300 million to ease its debt burden.
About 26,000 union members are voting on a memorandum of understanding that would result in a four-year contract extension beyond the current March 2015 expiration. Approval by the Teamsters is required for the debt reduction plan, announced late last month, to proceed.
YRC sought the debt reduction to lower interest expense, and contract changes to control long-term operating costs in the face of losses that have continued since 2007.
Changes to the union agreement were put out for a vote after the company said it needed long-term contract certainty beyond March 2015 to placate its lenders.
“The [debt] agreement is a momentous step toward delevering the company’s balance sheet, significantly improving the company’s credit profile, and is expected to secure some of the best paying jobs in the [less-than-truckload] industry,” CEO James Welch said in a statement.
Welch also said that if union members reject the contract changes and the debt deal fails, “it would unfortunately mean some very difficult decisions for the company and its employees.”
YRC’s debt load, excluding the amounts in the agreement, is nearly $1.4 billion. Welch said in November that interest costs of $124.2 million prevented the company from reporting a profit after three quarters. Over the first nine months of 2013, YRC reported earnings before interest and taxes of $30 million.
As part of the memorandum of understanding, the Teamsters insisted on the retirement of at least 90% of the LTL carrier’s convertible notes.
Other terms contained in the MOU, such as potential future wage increases, haven’t been released. Teamsters at YRC have been working at a 15% pay reduction for more than three years. The company, based in Overland Park, Kan., ranks No. 5 on Transport Topics Top 100 listing of the largest for-hire carriers in the United States and Canada.
The company’s agreement with investors includes $250 million in cash that YRC will receive to pay off some of the notes. Under that portion of the agreement, 16.7 million new shares would be issued.
About $50 million would be raised by converting a portion of the notes into stock at a price between $15 and $16.01 a share. A portion of the notes may not be converted and will remain outstanding, YRC also said in its statement, without providing additional details.
In order for the debt deal to move forward, YRC also needs the support from 90% of holders of $124.3 million in the carrier’s pension fund debt.
YRC didn’t comment on the status of its negotiations with pension debt holders.
In the Dec. 23 statement, Chief Financial Officer Jamie Pierson said, “These transactions also clear the way for us to enter the senior debt markets to refinance our current term and asset-based loans at more favorable interest rates.”
The company did not provide any estimate of the potential savings from lower interest rates.
Separately, Carlyle Group Inc. said Dec. 30 it has invested $55.2 million in YRC. Carlyle, one of the carrier’s five largest investors, disclosed that it has acquired 2.33 million YRC shares at a cost of $35 million and agreed to exchange $20.2 million of convertible notes for 1.39 million shares of stock for resale.
