YRC extends exchange offers for notes

New York, Dec. 23 - YRC Worldwide Inc. announced an extension to the exchange offers and consent solicitation for its contingent convertible notes and the 8½% guaranteed notes due April 15, 2010 issued by YRC Regional Transportation, Inc., formerly USFreightways Corp.

The expiration is now 11:59 p.m. ET on Dec. 28, delayed form 11:59 p.m. ET on Dec. 23.

As of 5 p.m. ET on Dec. 23, holders had tendered 53% of the 8½% notes and 90% of the combined 5% and 3.375% notes, in total 80% of the company's outstanding notes.

Those numbers compare to 35% of the 8½% notes and 91% of the 5% and 3.375% notes for a total of 75% at the previous expiration date, Dec. 15.

YRC said "it continues to work with its noteholders through this holiday period to increase the level of support for this recapitalization, which is a key part of the comprehensive plan the company is implementing to place it on a more solid financial base."

YRC previously announced on Dec. 21 that it had received the lender and pension fund approvals needed to change the minimum tender condition in the offer. In addition, the S-4 registration statement for the offers has been declared effective by the Securities and Exchange Commission.

Before that, on Dec. 17, YRC revised the offer and extended the expiration to 11:59 p.m. ET on Dec. 23 from Dec. 17.

YRC lowered the minimum tender condition to 70% of the outstanding principal amount of 8½% notes and 85% of the outstanding principal amount of convertibles on a combined basis, according to a company news release.

Before the change, the offers were conditioned on the tender of at least 95% of the notes.

As of 5 p.m. ET on Dec. 16, holders had tendered and not withdrawn 57% of the notes, down from 75% on Dec. 15.

The company needs to successfully complete the exchange offers in order to gain open access to its $106 million revolver reserve and to begin deferring payment of lender interest and fees of about $25 million per quarter under its recently amended credit agreement and asset-backed securitization facility.

Lenders approved the changes, subject to the following requirements and other amendments to the credit agreement:

• The existing $106 million revolver reserve will be divided into two separate reserves of $50 million and $56 million. The $50 million revolver reserve will be available as permitted interim loans through Dec. 31, 2011 for specified operating needs so long as the company provides some requested information to the lenders by Jan. 11, 2010. The company will be able to access the $56 million revolver reserve upon the satisfaction of some conditions;

• The conditions to access the additional revolver reserve in excess of $106 million will be amended to require that the company retire any 8½% notes that remain outstanding following completion of the exchange offers and obtain the consent of two-thirds of the lenders;

• The company will be required to use unsecured debt or equity financing to retire any remaining 8½% notes or 5% convertibles; and

• The minimum consolidated EBITDA covenant for the second, third and fourth fiscal quarters of 2010 and the minimum available cash covenant will be reset.

The change to the minimum tender condition also needed to be approved by some multiemployer pension funds that have deferred at least 90% of the deferred contributions under a contribution deferral agreement.

This fund consent allows YRC to continue to defer the payment of interest and to continue to be able to defer the beginning of the repayment of deferred contributions to some of the funds once the exchange offers are successfully completed.

Dec. 31 deadline 'critical'

YRC said that if it completes the exchange offers prior to Dec. 31, it will be able to defer approximately $19 million of interest and fees that would otherwise be due under its credit agreement on that date.

If it were obligated to make this payment and did not have access to the $106 million revolver reserve, the company said its liquidity position would become unsustainable. As a result, YRC believes it is "critical" that it completes the exchange offers prior to Dec. 31.

Financing may be needed

If the company completes the exchange offers at the minimum tender conditions described above, it will have $45 million of the 8½% notes outstanding following the offers. However, the credit agreement as amended requires that no more than $15 million of the 8½% notes be outstanding as of March 1 or the lenders may accelerate the obligations under the credit agreement.

YRC said its credit agreement will restrict it from using any of its operating cash to retire these notes and will as a result be required to obtain third-party financing if an insufficient amount of 8½% notes is tendered in the exchange offer.

The company gave no assurance that it will be able to obtain this financing prior to March 1 or that the terms of any such financing will be favorable to the company or its stakeholders.

Offer details

The contingent convertibles covered by the offers include YRC's 5% net share-settled contingent convertible senior notes due 2023, 3.375% net share-settled contingent convertible senior notes due 2023, 5% contingent convertible senior notes due 2023 and 3.375% contingent convertible senior notes due 2023.

The company expects to seek relief under the U.S. Bankruptcy Code if it is unable to complete the exchange offers and address its near-term liquidity needs, according to a form S-4 filed with the SEC on Nov. 9.

Holders are being offered 42 million shares of common stock and $250 million of class A convertible preferred stock in exchange for the notes.

For each $1,000 principal amount, the company will issue 77 shares of common stock and 9.167 preferreds in exchange for 5% convertibles, 74.690 shares and 8.892 preferreds in exchange for 3.375% convertibles and 79.310 shares and 9.442 preferreds in exchange for 8½% notes.

Holders will receive an additional 77 shares and 9.167 preferreds for each $1,000 of accrued interest through Dec. 9. Because the offers were extended, interest accrued beyond Dec. 9 will be deemed waived by holders who tender.

The company said it decided not to make the Nov. 25 interest payment due on the 3.375% convertibles.

If all holders participate in the offers, $536,837,000 principal amount of notes will be exchanged for a number of shares of common stock and preferreds representing 95% of YRC's outstanding common stock on an as-converted basis.

Each preferred will have a liquidation preference of $50.00 and will be automatically converted into 220.28 shares of common stock 18 months after stockholders approve the issuance of additional shares. This is equivalent to a conversion price of $0.227.

The preferreds will initially pay no dividends. If stockholder approval is not received, the preferreds will begin to accrue dividends at 20% per year.

Consent solicitation

YRC is also soliciting holders to become party to a mutual release and to consent to amendments that would remove substantially all of the material covenants from the indentures governing the notes other than the obligation to pay principal and interest and those relating to the conversion rights of the convertibles and to eliminate or modify the related events of default.

Holders who tender must become party to the mutual release and consent to the amendments.

YRC said the trustee for the convertibles has indicated it will likely not agree to enter into the supplemental indentures needed to implement the amendments if the company seeks to remove the put option granted to the noteholders.

As a result, YRC has waived the satisfaction of some conditions to the exchange offers relating to the proposed amendments to be made to the convertibles, including the condition that the trustee not raise any objections to the exchange offers and the condition that the supplemental indentures relating to the amendments to the convertibles shall have become effective.

Notwithstanding these waivers, the company said it will continue to seek the applicable consents and intends to "vigorously pursue any measures necessary" to obtain the effectiveness of these consents.

YRC said that if the trustee refuses to enter into the supplemental indentures, the company may agree with the trustee to enter into a supplemental indenture providing for the other amendments while in the meantime pursuing remedies that would require the trustee to give effect to all the amendments.

Plans for the offers were announced Oct. 30, and they began Nov. 9. They were previously scheduled to expire on Dec. 15 and, before that, Dec. 8.

In addition to the minimum tender condition, the offers are conditioned on the company remaining in compliance with the terms of its credit agreement and the ratification of the job security plan reached with the International Brotherhood of Teamsters.

Rothschild, Inc. (800 753-5151 or 212 403-3716) and Moelis & Co. LLC (866 270-6586 or 212 883-3813) are the lead dealer managers for the exchange offers. Global Bondholder Services Corp. (212 430-3774 for banks and brokers, others call 866 612-1500) is the information agent.

YRC is an Overland Park, Kan.-based provider of transportation services for the shipment of industrial, commercial and retail goods.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.