YRC Worldwide Seeks Federal Funds

Reports indicated YRC Worldwide would apply for Troubled Asset Relief Funds.

A report in the Wall Street Journal attributed statements to Bill Zollars, president, CEO and chairman, that YRC Worldwide would seek federal funds to relieve some pension liabilities.

YRC Worldwide announced it has 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.

YRC Worldwide 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. Payments were due by the end of business on May 15th.

YRC Worldwide shares obligations for the multi-employer pension fund established under the National Master Freight Agreement negotiated by the unionized less-than-truckload (LTL) carriers. At issue is 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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