New financing terms clear way for changes at YRC

New financing terms clear way for changes at YRC

YRC plans to keep its separate subsidiaries, but share more resources. Photo credit: YRC Worldwide.

YRC Worldwide secured a longer financial runway from its lenders, obtaining a $600 million new term loan agreement extending its 2014 credit pact with lenders through 2024. The extended loan agreement is a prerequisite to a multi-year strategy carrier executives discussed with investment analysts last month during YRC Worldwide’s second-quarter earnings call.

The agreement gives the less-than-truckload (LTL) operator flexibility on interest rates if it hits financial targets. 

“We still have a few years left on our current-term loan, but there are a few things in there that limit us, at least from a strategic growth perspective, and we'd like to see those get removed,” CFO Stephanie Fisher said during the August call, transcribed by Seeking Alpha.

YRC Worldwide is moving into a new phase in its long recovery from a brush with bankruptcy a decade ago, seeking new operating efficiencies from its four asset-based LTL companies, consolidating sales and administrative functions, and using a new non-asset brokerage to offer shippers an enterprise-level, one-stop access point to its regional and national services. 

The company is eager to put the first half of 2019 behind it. YRC Worldwide had a net loss of $49.1 million in the first quarter and $23.6 million net loss in the second quarter. The holding company’s trucking subsidiaries, national LTL carrier YRC Freight and its regional group — which includes Holland, Reddaway, and New Penn — had slight second quarter profits.

The company attributed the net losses and falling revenue in part to customer defections in the months before a new five-year contract with the Teamsters union was approved in April, ensuring labor peace through 2024. The buildup of inventories by shippers ahead of United States tariffs on China and a slower industrial economy also received some of the blame.

With the labor agreement and new loan in place, the company can now move forward with network optimization, additional capital investments, and customer growth — goals laid out for stock analysts by CEO Darren Hawkins last month. YRC will be “intentional” in building revenue across its brands, but also in achieving closer coordination among those companies, he said.

“We have identified approximately 25 service centers for consolidation by the end of December 2019, bringing our projected service centers to approximately 360 by the end of the year, and we believe this just scratches the surface,” Hawkins said. That consolidation will help YRC and its operating companies build freight density and reduce capital investment needs, he said.

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.