YRC Worldwide Announces New Credit Agreement

In a filing with the Securities Exchange Commission (SEC), YRC Worldwide said it had entered into “Amendment No. 10” with JPMorgan Chase Bank, National Association and other lenders. “The Credit Agreement continues to provide the Company with a $950 million senior revolving credit facility, including sublimits available for borrowings under certain foreign currencies and for letters of credit, and a senior term loan in an aggregate outstanding principal amount of approximately $111.5 million,” said the company

Relative to financial covenants, “The Credit Agreement Amendment suspends the requirement that the Company maintain liquidity equal to or greater than $100 million at all times until October 13, 2009.”

This latest credit agreement amendment increases to $400 million the net cash proceeds YRCW can receive from asset sales during 2009 (other than certain specified asset sales, including the sale and leaseback transaction entered into in December 2008 between YRCW and NATMI Truck Terminals, LLC).

Stifel Nicolaus analyst David Ross observed, “ Unlike in August, though, at least 50% of future real estate sales proceeds go to prepay the outstanding revolving loans (with 50% of the prepayment amount increasing the revolver reserve).”

Ross added, “With seemingly sufficient liquidity at the end of 2Q09 to make it through 3Q09 without violating the minimum liquidity covenant, we do not understand why they needed a waiver in August. The waiver through October 13, in our opinion, means the company should continue to operate at least into mid-October.”

The company is facing a revote at its New Penn operation where Teamster workers originally rejected contract revisions that were passed for 90% of the company's unionized workforce. Ross labels a rumored shutdown ofNew Penn to fold it into YRC operations an idle threat. Says Ross, “We believe this is an idle threat, because it should cost the company more money to do that than to just keep New Penn operating as is (and why eliminate a positive EBITDA contributor and risk a large pension withdrawal liability payment and WARN Act payment in this liquidity crisis?). New Penn, in our view, remains the company's most profitable operation.”

What's your take? Join the discussion by clicking here: YRC's Future. . .your take?

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