S&P Removes YRC Worldwide, Con-way from CreditWatch List

Credit ratings firm Standard & Poor’s removed both YRC Worldwide and Con-way from its CreditWatch list this month, but maintained a “negative outlook” for the trucking companies as weak volumes and competitive pricing pressure less-than-truckload carriers.

S&P pulled YRC Worldwide off CreditWatch Aug. 14 after Teamsters employees at YRCW’s largest less-than-truckload subsidiaries accepted wage and benefits cuts. It dropped Con-way from the list Aug. 18 after the carrier reported a second-quarter profit.

The financial intelligence division of McGraw-Hill placed YRC and Con-way — the largest and third-largest less-than-truckload operators in the U.S., when ranked by 2008 revenue — on its CreditWatch list with “negative implications” in April.

YRC Worldwide, burdened by debt as well as falling demand for its services amid intense competition, has lost more than $2 billion since 2007.

However, the carrier recently negotiated a second round of wage and benefit cuts with the Teamsters union that would save it more than $800 million by the end of next year. A majority of Teamsters at the company's largest subsidiaries approved those cuts Aug. 7.

S&P maintained its negative outlook on YRC Worldwide, rating its corporate credit as "CCC." A CCC rating means a company is "vulnerable," according to S&P, and "dependent upon favorable business, financial, and economic conditions to meet its financial commitments."

Con-way's rating is "BBB", which indicates a company has "adequate" capacity to meet its financial commitments, but faces " adverse economic
conditions" that could weaken that capacity.

Con-way reported $31.5 million in net income in the second quarter on $1.1 billion in revenue, an improvement from the first quarter, when the company lost $153 million on $962.9 million in revenue. However, weak volumes, competitive pricing and lower fuel surcharge revenue "hampered" the carrier, S&P said.

"We expect that Con-way will continue to implement cost savings and reduce debt," S&P said. It's credit rating reflected Con-way's "strong market positions in its regional LTL and logistics business segments, its relatively stable operating performance and a satisfactory financial profile."

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