YRC Worldwide announced it has reached agreement with certain holders of its Series A Convertible Notes, Series B Convertible Notes and other institutional investors to reduce its debt by $300 million.
The agreement was needed as part of a requirement with the International Brotherhood of Teamsters (IBT) to retire at least 90% of the company’s Series A and B Convertible Notes in exchange of ratification of a Memorandum of Understanding (MOU) proposal with the IBT. Teamster members are currently voting on the MOU. The ratification vote is expected to be concluded by Jan. 8, 2014.
The retirement of debt is contingent on ratification of the MOU. In addition, the debt reduction deal is contingent on getting holders of at least 90% of the $124 million of the company's pension fund debt to amend and extend the currently outstanding note.
“The agreement is a momentous step toward delevering the company's balance sheet, significantly improving the company’s credit profile, and is expected to secure some of the best paying jobs in the LTL industry,” said James Welch, CEO of YRC Worldwide and President of YRC Freight. “The last two years have been a long and hard fought journey in turning around one of the largest trucking companies in America. After shedding a significant portion of our non-core assets and operations and with the help of our unionized and non-unionized employees, we have focused our attention back to what we do best — North American LTL trucking.”
Under the agreement, the investors will invest $250 million in cash for newly-issued shares of common stock of YRC Worldwide at a price of $15 per share. The proceeds will be used to pay off the existing 6% Convertible Notes due February 2014 and defease and/or pay off the existing Series A Convertible Notes due March 2015. In addition, holders of approximately $50 million principal amount of the existing Series B Convertible Notes due March 2015 will convert those notes to common stock at a price of $15.00 to $16.01 per share, further reducing debt.
The Series B Note holders that participate in the proposed transaction will also consent to amend the indenture to remove substantially all covenants and release the collateral securing those notes. The remaining Series B Convertible Notes may continue to be outstanding until their scheduled maturity of March 31, 2015. Consummation of the agreement is subject to a number of other customary conditions as well.
“These transactions will result in a substantial reduction of our debt and will position the company to address impending maturities, including the 6% Convertible Notes due in February 2014,” said Jamie Pierson, YRC Worldwide CFO. “These transactions also clear the way for us to enter the senior debt markets to refinance our current term and asset- based loans at more favorable interest rates.”