Friday, July 09, 2010

YRCW Out Of Cash Already?

Forget about the turnaround plan for YRCW.  They now need a "turn out the lights" plan.  A court order to pay bondholders is sounding the firm's death rattle:

A federal court has ordered struggling U.S. trucker YRC Worldwide to pay bondholders who opted out of a debt-for-equity exchange last year that kept YRC out of bankruptcy court.

The company is going to have a very hard time coming up with that $21.7mm by Aug. 9.  Its balance sheet as of March 31 shows current assets of $825.7mm and current liabilities of $1.2B.  The balance sheet ending June 30 will be quite telling and most likely will seal the company's fate.  If the current ratio isn't positive by then, YRCW is probably finished. 

These stubborn bondholders may have done the smart thing after all by refusing to convert to equity, as they now hold a senior claim against what will remain of the firm's assets when it ultimately goes into liquidation.  The bondholders' claims will likely be held as senior to employees' claims for pay in any bankruptcy action.  Drivers are probably looking at their last paycheck right now. 

Stick a fork in this turkey, because it's done.  Let this be an abject lesson to any logistics company that can't destroy its unions.

Full disclosure:  No position in YRCW.