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Shares of trucker YRC crash as restructuring goes awry


(Reuters) - Shares of YRC Worldwide Inc <YRCW.O> lost a quarter of their value, as the trucking company struggled with the implementation of operational changes designed to help reduce its large debt.

YRC, which was on the verge of bankruptcy two years ago, launched the restructuring program to save $25 million-$30 million annually as $1.36 billion of debt comes due starting next year.

The industry as a whole has faced challenges ranging from shortage of experienced drivers to new regulations that require truckers to work shorter hours.

But YRC, which is looking to refinance its debt, admitted that its current woes were mostly of its own making.

"Simply put, we were operating an inefficient network," Chief Executive James Welch said on a post-earnings call on Tuesday, after the company reported a loss of $44.4 million for the third quarter ended September 30.

The company said YRC Freight, its national freight service, was hurt as not enough of its drivers relocated to consolidated terminals that lead to manpower shortages, forcing the company to pay more for overtime and for third-party carriers. This also caused shipment delays and customer losses.

"The good news is we have regained our sales momentum and have re-secured a good portion of the business that was temporarily lost" since then, Welch said on the call.

The changes were necessary in part because of the company's reliance on less-than-truckload cargos, which require more handling and several customers to fill a truck.


The company said in a filing on Tuesday that it did not expect its liquidity would allow it to retire borrowings that mature in September of 2014 and thereafter, and would therefore have to refinance or restructure portions of its debt.

YRC had cash and cash equivalents of $170.5 million, as of September 30.

Creditors are looking for the company to lock in employees, represented by the International Brotherhood of Teamsters, to new contracts through 2020.

YRC met with the Teamsters last week for contract negotiations that it said would help with its refinancing.

"We believe the odds of approval (for a contract extension) are at least 70-30 as the Teamsters have no other choice if they want to preserve 26,000 jobs," said BB&T Capital Markets analyst Thomas Albrecht in a note.

Albrecht said he expects a contract extension would be similar to the current one, which has provided small annual wage increases since 2010.

YRC shares were down 21 percent at $7.68 in afternoon trading on the Nasdaq on Wednesday. The company had lost about $300 million of its value in the four months to Tuesday's close.

Shares of other less-than-truckload freight carriers Con-Way Inc <CNW.N> and Arkansas Best Corp <ABFS.O> were little changed.

(Reporting by Mridhula Raghavan and Rohit T. K. in Bangalore; Editing by Kirti Pandey and Sriraj Kalluvila)