YRC is seeking $1 billion from the federal government for relief from its pension obligations in an unprecedented move as it struggles to keep operating under heavy pressure from its lenders.
YRC Chairman, President and CEO William D. Zollars said the company will apply as early as May 15 for funding from the U.S. Treasury’s Troubled Asset Relief Program.
The request comes just days after YRC warned in an SEC filing May 11 there was “substantial risk” that recent cost reductions and shipment increases at the company would not be enough to meet its $45 million second quarter earnings requirement.
YRC has an annual pension obligation estimated at $2 billion over the next four years. But Zollars has called the system under which YRC must pay the pensions of employees from companies that went out of business years ago “a penalty for success.”
“I don’t see how YRC qualifies under TARP,” said David G. Ross of Stifel Nicolaus. “TARP was meant to stabilize the financial markets and restore lending capability and liquidity to the financial markets – it has nothing to do with trucking. This is just another indication of them trying anything they can to get help, to raise money, to get cash.
It also appears to be a move by Zollars to make good on his intention, mentioned in an interview in December, to try to work with the Obama administration to permanently eliminate additional costs resulting from payments to legacy companies. Applying for TARP funds, Zollars said, is a “way to get the dialogue started about the pension issue.”
Contact John Gallagher at firstname.lastname@example.org.