YRC Worldwide Quiet on TARP Funds

YRC Worldwide CEO Bill Zollars talked about everything but TARP at the Wolfe Research Global Transportation Conference.

After dropping a financial bombshell by telling a Wall Street Journal reporter YRC Worldwide (YRCW) could apply for federal funds under the Troubled Asset Relief Program (TARP), Bill Zollars, president, CEO and chairman, remained silent on the issue when addressing a financial analyst meeting May 19th.

YRCW announced on the previous Friday it had finalized an amendment with the company's lenders of its credit facilities that eliminates the second quarter earnings before interest, taxes, depreciation and amortization (EBITDA) covenant. The company's other financial covenants, including minimum liquidity comprised of cash and cash equivalents, restricted cash and availability under the credit facilities, remain in effect. Zollars did address the liquidity issue and pointed out the company had liquidity of $257 million, well ahead of the $100 million required under the bank covenants.

The Wall Street Journal article quoted Zollars on pension issues. YRCW had entered into discussions with the International Brotherhood of Teamsters (IBT) to provide company real estate as collateral to various pension funds in lieu of making payments or contributions for certain months. In a 10-Q filing with the SEC, YRC Worldwide also stated that if the pension deferrals are not agreed upon by the Teamsters and the company does not make its proper payments, that it could trigger a withdrawal liability and cause a significant increase in payments due to the funds. Zollars told the financial analysts YRCW had accrued the funds for the April pension payment but had not made the payment.

YRCW shares obligations for the multi-employer pension fund established under the National Master Freight Agreement negotiated by the unionized less-than-truckload (LTL) carriers. Zollars took issue with the liability the remaining members of the pension fund share for retirees and vested former employees of carriers that have ceased operations. That liability spread across an ever-diminishing number of carriers until YRC Worldwide and ABF are the major employers responsible for those pension liabilities.

In January 2009, we reported that Con-way had reached an agreement with the Central States Pension Fund to release Con-way from all claims against Con-way related to the closure of Consolidated Freightways in 2002. Con-way stressed at the time that the settlement agreement does not constitute an admission of liability by Con-way. “The agreement also provides for the release by Central States of all claims against Con-way related to contributions to any Central States pension or to withdrawal liability, and for the extinguishment of the $662 million withdrawal liability assessment made by Central States against Con-way,” said a Con-way statement.

At that time, equity analyst Stifel Nicolaus said, “The Central States plan remains the most woefully underfunded of the union trucking multiemployer plans, with YRC Worldwide citing roughly a $3 billion+ contingent withdrawal liability and Arkansas Best citing an approximate $650 million contingent withdrawal liability just for the one plan.” The estimates for the contingent withdrawal liability change over time based on a number of factors.

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