YRC Worldwide Inc. announced today, June 18, that it has finalized an agreement with Central States, Southeast and Southwest Areas Pension Fund in which the company will provide certain of the company’s real estate as collateral in lieu of making pension contribution payments during the second quarter. The company says the estimated combined contribution payment deferral to Central States is about $83 million, and that the agreement calls for YRC Worldwide to repay the deferred contributions over three years beginning in January 2010.
Central States is the largest of the company’s International Brotherhood of Teamsters multiemployer defined benefit pension funds, representing 58 percent of the company’s monthly pension funding obligations. YRC Worldwide says it also is finalizing discussions with its other IBT multiemployer pension funds to join as participants in this same agreement; currently, the company has deferred about $50 million related to these other funds.
YRC Worldwide also announced that it finalized an amendment to its credit agreement with its lenders that permits the company and its subsidiaries to grant second-priority liens on certain owned real estate in conjunction with the pension deferrals; the amendment also releases escrow funds of $73 million, generated from the company’s prior real estate transactions, to pay down the revolving credit facility without reducing the company’s borrowing availability under the facility.
The company says that it continues to close on its sale and financing leaseback agreements, with $94 million closed quarter-to-date through June 16. The company expects to close about $77 million of additional sale and financing leaseback transactions that currently are under contract.
“These transactions are especially critical as we continue to face substantial headwinds from the global economic recession,” says Bill Zollars, chairman, president and chief executive officer of YRC Worldwide, based in Overland Park, Kan. “Today’s announcement marks important milestones, which are part of our overall strategy to provide us with greater financial flexibility during the economic recession, giving us additional liquidity and the ability to use our cash to support the business. Most importantly, we continue to improve the level of service to our customers, while we focus on making our cost structure more competitive with others in our industry, strengthening our balance sheet and reducing our short-term cash obligations.”
The company says at May 31, its cash and cash equivalents, excluding restricted cash of $61 million, was $155 million compared to $151 million at April 30, and that the aggregated cash balance and available unused capacity under the credit agreements was $242 million at May 31, compared to $221 million at April 30.
The company says the amendment has the same terms in regards to total liquidity and capacity under the facility that existed prior to the amendment. “We now have immediate access to the escrow funds, which is a month before the original agreement, and there is not an immediate reduction to our capacity,” says Tim Wicks, YRC Worldwide executive vice president and chief financial officer. The company says it did not pay any fees to the lender group associated with the amendment.