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YRC Worldwide

Trucking Company

"YRC Worldwide Inc., a Fortune 500 company headquartered in Overland Park, Kan., is a leading provider of transportation and global logistics services. It is the holding company for a portfolio of successful brands including YRC Freight, YRC Reimer, Reddaway, Holland and New Penn, and provides China-based services through [two joint ventures]. YRC Worldwide has the largest, most comprehensive less-than-truckload (LTL) network in North America with local, regional, national and international capabilities. Through its team of experienced service professionals, YRC Worldwide offers industry-leading expertise in heavyweight shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence". From LinkedIn Profile.

BDC Credit Reporter View

YRC Worldwide is the leading LTL (or less-than-truckload) freight carrier in the United States. The Company has been facing difficult macro conditions in the US for several quarters as freight volumes have dropped, while facing higher pressures on operating costs. The Company is highly leveraged, with over $1bn of debt, and an agreement with lenders to bring debt to EBITDA down from 3.75x down to 3.0x in the next 15 months. Currently, after the IIIQ 2016 results, YRC is operating within the requirement at 3.45x, but that's too high for the covenants starting in March 2017. The Company currently has the flexibility to use some of the cash on its balance sheet to pay down debt and stay compliant. However, liquidity needs are high due to capex requirements (truck replacements and technology spending)and if EBITDA continues to drop, YRC could trigger a default. The BDC Credit Reporter questions the ability of YRC to meet end of 2017 leverage requirements in a declining market, and new capital and/or renegotiated debt may be in the cards. BDC exposure-all by CM Finance-is in the Term Loan, and may have problems during 2017. We have a Corporate Credit Rating of 3, and with the latest results the credit trend is Down, but that may not show up in the valuations (which at the end of June 2016 included only a 6% discount to par) until December.