YRCW will work on figuring out how it will rebuild itself using the $ 700 million it gets from the US Department of the Treasury. His first achievement: getting rid of all debt payments for four years.
In a filing with the Securities & Exchange Commission on Wednesday, carrier LTL said the $ 700 million it was receiving from the federal government taking an approximately 30% stake in the company would be split into two loan tranches, one totaling $ 300 million and the other totaling $ 400 million. The due date for both is September 30, 2024, to be settled with a lump sum payment.
The first loan, dubbed the Tranche A loan, will be used to honor JRCW’s obligations in several areas, including its obligations to the Teamsters Central Pension Fund. YRCW was in arrears with the fund, and its employees who are members of the Teamsters were receiving benefits paid out of the fund even though YRCW had stopped contributing to the fund earlier this year.
The money in this tranche will also be used to make interest payments on YRCW’s debt, which at the end of the first quarter was around $ 880 million (compared to a current market cap of around $ 108 million. dollars). Real estate and material leases can also be paid out of the proceeds of Tranche A.
Tranche B will be used to purchase new tractors and trailers. The company’s plan to use a large part of the proceeds from the government investment was announced the day the $ 700 million financial support plan was announced.
The loans come with requirements that the company must maintain liquidity of $ 125 million until it can meet quarterly profit before interest, taxes, depreciation and amortization (EBITDA) targets of between 100 and 200. millions of dollars. YRCW’s first quarter EBITDA was $ 34.1 million.
There is also a requirement that comes from the fact that the money for the investment of the federal government comes from the CARES law created in the event of a pandemic. This requirement is that YRCW keep its March 24, 2020 employment levels stable “to the extent possible” and that if a reduction were necessary, it would not exceed 10% of that number. YRCW has approximately 30,000 employees.
There are also executive compensation requirements. Dividends or other distributions of capital are not permitted until 12 months after repayment of the loans.
In an interview with the Wall Street Journal, YRC CFO Jamie Pierson said the pushed back debt due date to 2024 would give the company “three and a half years to focus on the business, without any deadline. It’s a new day. We just don’t have to explode.
In a filing Tuesday with the SEC, YRCW clarified some of the details of the federal government’s investment. The actual stake in the company that the Treasury Department will take is 29.6%.
YRCW stock fell from a recent low of $ 1.46 on June 25, just before the Treasury’s investment announcement, to close at $ 2.55 on Wednesday. It traded up to $ 3.55.