UPDATE: YRC Board Member Trubeck Optimistic Company Can Complete Restructuring
(Updates with additional comments and details beginning in 10th paragraph.)
By Bob Sechler
Of DOW JONES NEWSWIRES
A YRC Worldwide Inc. (YRCW) board member voiced optimism Monday that the debt- laden trucking company will avoid bankruptcy, downplaying a warning in its annual report last week that lenders could declare it in default.
"It looks to me like [lenders, Teamsters and other stakeholders] are working toward the same goal, which is to pull this thing together" without pushing YRC into bankruptcy, board member William Trubeck said in an interview. "Nobody benefits or is anxious to see YRC go out of business."
Trubeck, who recently was named interim chief financial officer after YRC announced that CFO Sheila Taylor will leave the company March 31, also said he doesn't consider the company any closer to a bankruptcy filing than it was at the beginning of the year, despite last week's warning.
YRC said in the annual report filed March 14 that a "milestone failure" had occurred in its efforts to negotiate a critical financial restructuring because it had missed a requirement to get certain nonbinding agreements on terms by March 10.
The failure means lenders have the right, but not an obligation, to declare YRC in default, in which case YRC anticipates "that we would seek protection" under the bankruptcy code, the company warned.
YRC noted in the annual report that the agent of record for its lender group-- J.P. Morgan Chase & Co. (JPM)--hadn't recommended declaring a default.
Regardless, the warning rattled investors, and YRC shares, which closed Monday down 2 cents at $1.86, have slumped nearly 21% in its wake. In addition, Standard & Poor's Ratings Services and Moody's Investors Service both cut YRC's already low debt ratings. The stock rose 3.8% after hours to $1.93.
Trubeck said Monday that he understands such reactions, but he called the underlying issue more of "a hiccup" in restructuring negotiations than a major roadblock. He chalked up the stark wording in the annual report largely to the legalize required in financial reporting.
"It's an issue of really just a detail in the negotiations," said Trubeck, who has been a YRC board member since 1994. "I'm very comfortable that we will get past this milestone, that we will meet it and we will be able to go forward."
He noted that lenders have been cooperative with YRC throughout its lengthy effort to find firm financial footing, agreeing to 20 amendments to credit agreements over the past several years.
The company has said the issue that spurred the "milestone failure" cited in the annual report involved the interest rate sought by a majority of multi- employer pension funds on deferred pension payments, which caused other parties to balk.
YRC has targeted late April as the date for a final restructuring agreement, after which it plans to hold a shareholder vote on the plan in late July.
Two weeks ago, YRC announced that Taylor, who had served as CFO since October 2009 and previously served as treasurer, planned to leave "to pursue opportunities outside of the less-than-truckload industry."
Trubeck said Monday that the timing of her departure and the bankruptcy warning in YRC's annual report are coincidental.
"There is absolutely no connection between the two," said Trubeck, who formerly served as CFO of H&R Block Inc. (HRB) and Waste Management Inc. (WMI) and has led a variety of restructuring efforts. "I just wouldn't read anything more into it."
He noted that YRC's underlying freight volumes are improving as the U.S. economy recovers, pointing to an announcement earlier Monday by YRC regional subsidiary Holland that it will hire 1,000 drivers this year.
"We're moving along the right path on volume growth," Trubeck said. "That's all positive at this juncture."
Overall, YRC Worldwide had about 32,000 employees at the end of 2010, fewer than half the 66,000 it had at the end of 2006, according to its annual report.
-By Bob Sechler, Dow Jones Newswires; 512-258-1690; bob.sechler@dowjones.com
(END) Dow Jones Newswires
03-21-111850ET
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