YRC Worldwide Seeks $500 Million Debt-Stock Swap

YRC Worldwide will launch a debt-for-equity exchange offer this week that could wipe more than $500 million in debt from the financially-troubled trucker's books.

The exchange would significantly cut, but not eliminate, YRC Worldwide’s $1.6 total billion debt load by offering bondholders stock in return for $538.6 million in bonds. The company sees the exchange as a key milestone on its road toward recovery, as it struggles to stem the loss of customers and rebuild a business that has lost more than $2 billion over the last 10 quarters. The carrier reported a $158 million loss for the third quarter on Friday.

If the exchange is successful, it will trigger a new agreement with YRC’s lenders that would make more money available to the cash-strapped trucking operator. It would have full access to its $106 million revolver reserve, which could be used to support operations. Its lenders would also defer $25 million per quarter in interest fees and payments through 2011.

Both moves would improve the company's liquidity, and that would help YRC Worldwide stave off bankruptcy, at least in the short term, analysts and other industry observers said.

"We believe recent actions by banks provide enough near-term flexibility and access to liquidity to stave off a bankruptcy filing," said R.W. Baird analyst Jon Langenfeld. However, he said the company's success depends on stemming market share losses and reducing its cash spend.

"Though we believe a bankruptcy filing is less likely near-term, YRCW's intermediate-term bankruptcy risk remains elevated," he said.

Contact William B. Cassidy at wcassidy@joc.com.