Midday Commentary: YRC Worldwide in focus as shares plunge; Alcoa quiet after weak earnings

By Rebecca Melvin

New York, Jan. 10 - YRC Worldwide Inc.'s convertibles were in focus early Friday as shares of the Overland Park, Kan.-based trucking company plunged on news that its union employees rejected a proposal to extend their contract, thereby putting the company's much needed refinancing agreement in jeopardy. Creditors had made the financing contingent on contract approval.

One trader said that he was trying to figure out a level on YRC's A series convertibles. A second trader said the issue last traded at 98 and was still in the upper 90s. YRC shares were down $3.59, or 23%, at $12.08 in late-morning trade.

As previously reported, YRC reached an agreement on Dec. 23 with some holders of its series A convertible notes and series B convertible notes and other institutional investors to allow it to reduce debt by about $300 million. That would have allowed the company to retire at least 90% of the convertible notes.

Elsewhere, Alcoa Inc.'s convertibles were quiet despite lower shares after the Pittsburgh-based aluminum producer reported weaker-than-expected earnings for its most recent quarter.

Alcoa's 5.25% convertibles, which are due in March, were quiet early Friday but seen at parity plus 0.05 point to parity plus 0.75 point, a New York-based trader said.

The December jobs report turned out to be a downside surprise, lending confusion to the financial markets, a convertibles analyst said.

The Bureau of Labor Statistics said that U.S. private-sector employers hired only 74,000 workers in December, which is the lowest level since July 2011 and not even within striking distance of the more than 200,000 jobs that many economists and others were expecting.

The unemployment rate fell to 6.7%, however, due to a drop of 347,000 in the U.S. labor force.

The government's report was at odds with that of Automated Data Processing and Moody's Analytics on Wednesday, which reported a better-than-expected gain of 238,000 private-sector jobs for December.

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