Wednesday, December 22, 2010

YRC Worldwide Asks For Stay Of Execution

YRC Worldwide is looking for a way out of a death spiral debt trap.  Its creditors are giving it a little slack, but other stakeholders may not be so understanding:

YRC Worldwide is asking the Teamsters union and pension fund managers for more time to restructure the trucking company’s troubled balance sheet.

I have to hand it to YRCW's management.  They manage to stave off one short-term disaster after another.  The Teamsters are a different story.  The new creditors' agreement may embolden them to ask for accelerated reinstatement of the pension plan contributions they surrendered. 

Recapitalizing a balance sheet involves writing down debt and/or injecting equity.  Forget about the debt writedowns; creditors extended the payment timeline with the expectation that their positions won't be written down at all.  That leaves YRCW with a need for more equity in Q1 of 2011.  Hmmm, they just went through a reverse split to raise their share price past the de-listing threshold, so issuing more shares means dilution.  They'll be right back in the NASDAQ de-listing queue with that move. 

I still don't see a happy ending for this company, but comatose patients have been known to hang on for years before either reviving or expiring.  I am not aware of any coma patient who could revive while a cancer was eating away inside them.  YRCW's cancer is its unionized workforce.  It is time to cut them out to ensure survival. 

Nota bene:  No position in YRCW.  I know that's difficult for you Teamsters to comprehend, but you folks can't operate at my intellectual level anyway.  I really only write for smart people.