Tuesday, March 01, 2011

YRCW Restructuring Extended

YRCW stakeholders have granted the trucker an extension on its restructuring plan.  That's the good news.  The plan will lead to both deferral of interest payments to bondholders and significant equity dilution for shareholders.  That's the bad news.  All classes of YRCW's investors will thus get the worst of all possible worlds.

The dilution will force YRCW's share price back down to penny stock levels very soon.  It's headed there already on the news, with a drop of almost 15% today.  The clowns on YRCW's Yahoo Finance message board who've been pumping the stock relentlessly are too stupid to know they've been on the wrong side of this trade for too long. 

Where is this $300mm in new capital going to come from?  Christmas is over so count Santa Claus out.  Maybe the Easter Bunny could cough it up this spring.  The main reason for that injection seems to be to preserve the Teamsters contract, but it would be nice to have more details for confirmation.  Speaking of Teamsters, Fitch is looking to downgrade YRCW's debt even further while the Teamsters line up to claim the lion's share of new equity and convertible debt.  If there was ever a smoking gun that Teamster influence is running YRCW into the ground, there it is.  The Teamsters are firing that smoking gun at the heads of YRCW shareholders.  Pow!  There's another direct hit. 

Investors can avoid debacles like this in the future by shunning unionized companies like the plague.  Companies can spare their customers and shareholders these episodes by driving unions out of their operations.  No one deserves to put up with a union-sponsored nightmare. 

Full disclosure:  No position in YRCW.