YRC bond-CDS combos being sold with eye to bankruptcy, Teamsters warn

By Angela McDaniels

Tacoma, Wash., Dec. 22 - YRC Worldwide, Inc. bonds and credit default swaps are being marketed together in an "attempt to have investors vote against a restructuring that would save YRCW," International Brotherhood of Teamsters general president Jim Hoffa said in a letter sent to officials on Tuesday.

"Certain financial firms have been or are marketing and/or underwriting a strategy where bonds in YRCW would be bought by investors with the intent of voting against the exchange, thereby triggering a bankruptcy that would pay the investors and possible other financial firms huge profits from the high CDS payments which would be triggered by a YRC bankruptcy or liquidation," Hoffa said in the letter, which was included in a Teamsters news release.

The letter was sent to the Securities and Exchange Commission, attorneys general, state insurance officials and congressional leaders on financial industry oversight. In it, Hoffa asks for an investigation into the promotion of CDSs for YRC bonds.

As previously reported, YRC is holding exchange offers and a 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 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.

YRC is also soliciting noteholders 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.

The offers will expire at 11:59 p.m. ET on Dec. 23.

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.

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

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