YRC Worldwide Inc. said that it has completed an important step toward finalizing an amendment with its banking group by obtaining waivers under its credit facilities.
The company previously announced discussions with its banking group to modify certain terms of its credit facilities, including changes to its leverage ratio, in addition to early renewal of its asset-backed securitization facility. The company announced Friday, Jan. 16, that its banking group provided waivers for the credit facilities until mid-February to allow sufficient time to amend the facilities and renew the ABS without a delay in reporting the company’s 2008 results scheduled for after market on Jan. 29.
Given that YRC canceled its tender offer in late December and retained the $250 million of cash drawn on the revolver in October 2008, the company expects its total debt to exceed 3.5 times — a limit established in its credit facilities — its trailing 12 months earnings before interest, taxes, depreciation and amortization as of Dec. 31.
“This is another indication that our banking group supports the strategic actions we are taking and is working with us to provide the flexibility we need during this economic recession,” says Bill Zollars, chairman, president and chief executive officer. “We are pleased with the discussions so far and remain confident that we can work out a mutual agreement that provides flexibility in our leverage ratio while improving our liquidity position.”
The company says that at Dec. 31 it had about $300 million of cash and expects to generate additional cash from sale and leaseback transactions, including its pending transaction for $150 million, and proceeds from sales of excess facilities, while reducing its 2009 equipment purchases due to the integration of its national companies. The company also recently announced ratification of a 10 percent reduction in union wages that is targeted to result in annual cost savings of $220 to $250 million in addition to the $75 to $85 million in savings from nonunion compensation reductions that were effective Jan. 1. When combining these cost savings with the planned run rate of $200 million of operating income from the integration of the Yellow Transportation and Roadway networks, the company expects to improve its operating performance by about $500 million going into 2010.
“We continue to take the appropriate steps to improve our financial position and enhance our service to our customers,” Zollars says. “The operating environment remains challenging, but with the measures we are taking, including removing nearly half a billion of cost, we are confident that we can come out of the recession as a stronger organization.”