The labor concessions approved by 62 percent of YRC Teamsters employees eliminate fears of an imminent shutdown at the nation’s largest trucking operator, both at its nationwide less-than-truckload unit and regional subsidiaries.
It’s not the end of YRC’s challenges, however. There are more hurdles for the company to jump, though many depend on the assistance of lenders that have been more than willing to help the $5.3 billion company on previous occasions.
The biggest immediate obstacle is the agreement’s requirement that YRC find $300 million in new equity financing by year-end. If the company can’t secure an outside investor, the Teamsters want YRC’s lenders to convert $300 million in debt to stock.
That raises the prospect of another hair-raising finish to the year for YRC, which last year barely closed a $464 million debt-for-equity swap by its Dec. 31 deadline.
Instead of reluctant bondholders, however, the company will be dealing with its banks, which some might argue deserve a share of the business at this point.
The contract revision locks other agreements in place, including a new $325 million asset-backed loan that would have expired without ratification. YRC does plan to replace the asset-backed security loan as part of its long-term restructuring.
The Teamsters agreement extends a 15 percent wage cut until 2015 and cuts the company’s contributions to union multi-employer pension plans by 75 percent. That will save YRC about $350 million a year, or $1.4 billion over the next four years.
The company hopes that will increase customer confidence and bring some freight back that shippers transferred to other LTL carriers over the past three years.
Some analysts aren’t convinced. “We do not believe this new agreement significantly changes the company’s position in the LTL marketplace,” said David Ross, trucking and logistics analyst at Stifel Nicolaus.