Commentary: YRC struggles to offload debt
After a lengthy negotiation between less-than-truckload carrier ABF Freight and its union on a new contract — a discussion that dragged on throughout 2013, necessitating numerous contract extensions and even bringing about a strike vote — officials at YRC, another LTL trucker, are taking a different tact with their employees.
Last fall, YRC’s management met with its employees union to try to extend its current contract, which doesn’t expire until March 2015, for another five years. The move, YRC said, would provide the cost savings it needs to survive in the current environment and allow it to refinance its outstanding debt —$69.4 million of which comes due in February, with around $1 billion due in the next two years, according to reports.
The new contract would include no wage cuts, but offers no increase in 2014, delaying pay raises until 2015.
The new contract also calls for increasing the overtime pay threshold from eight hours to 40 hours; a change to health and welfare rules so that a partial work week will no longer pay out a full week of benefits; and a change in the outsourcing rules allowing for non-union maintenance and road work.
YRC is also hoping to sell up to 3 million shares, according to a filing with the Securities and Exchange Commission, to repay its February loan. During the fourth quarter, through Dec. 2, YRC saw its stock price range from $17.99 per share down to $7.06 per share. Its low for 2013 of $5.75 per share occurred during the first quarter.
In the document, officials also laid out why the current contract extension is necessary for the continued health of the company.
“If we are unable to extend our existing union agreements, we may be unable to refinance or restructure the portions of our debt which mature in 2014, which would have a material adverse effect on our business, financial condition and results of operations,” the company said in the SEC filing. “Any deterioration in our relationship with our unions could also place us at a disadvantage relative to our nonunion competitors.”
YRC also cited potential pension fund increases, insurance pressures, cost of compliance with government regulations, and a host of other factors that have put pressure on the company.
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