YRC Worldwide completes restructuring plan with issue of convertibles, exchange of obligations

By Jennifer Chiou

New York, July 22 - YRC Worldwide Inc. announced the completion of all major milestones in its restructuring plan that kicked off on April 29. Actions included the issue of $100 million of new convertible notes as well as the exchange of a portion of the company's loans and other obligations for new securities, including stock.

As announced in a filing with the Securities and Exchange Commission on May 17, the company's restructuring included new 10% series A convertible senior secured notes due 2015 and new series B convertible senior secured notes due 2015.

The plan's purpose was to improve YRC's balance sheet and provide the liquidity available to operate its business. Specifically, the company amped its liquidity by replacing its existing asset-backed securitization facility with a new $400 million three-year asset-based loan facility.

As a result of debt exchanges, the company's shareholders at the time of the exchange will be reduced to holding 2.5% of YRC's outstanding stock and will be subject to further dilution by a proposed management incentive plan and the conversion of new convertible notes.

In a news release, the company stated that the due dates of debt under its credit agreement and previously deferred pension payments have been extended until March 2015.

"YRC Worldwide has accomplished what the cynics said couldn't be done," John Lamar, chief restructuring officer and lead director, said in the release.

"We are grateful to all the stakeholders - including union and non-union employees, lenders and customers - who have supported us throughout this process."

When the plan was announced, the company said it had been deferring payment of interest and fees to its credit agreement lenders since October 2009, as well as interest and facility fees to accounts receivable purchasers and interest and principal to multi-employer pension funds under a contribution deferral agreement.

If the company did not complete the restructuring, YRC already said it would have been very unlikely that it would be able to generate enough cash to pay the principal and interest due on its debt, and the company would likely be forced to file for bankruptcy.

Restructuring terms

As previously reported, under the restructuring:

• An exchange offer was made under which credit agreement lenders received newly issued series B convertible preferred stock convertible into 72.5% of the restructured company's outstanding common stock and the new 10% series A convertibles that are convertible into additional shares of new common stock;

• The company's lenders were to purchase a total of $100 million of the company's newly issued 10% series B convertibles at par, the proceeds of which were to be retained by the company for use in its business;

• A total of 1.23 million shares of newly issued series B preferred stock convertible into 25% of the company's new common stock was to be issued to a trust or deferred-tax qualified plan and allocated among eligible Teamsters-represented employees;

• The company's ABS facility would be refinanced in full with an asset-based lending facility; and

• The note securing the company's deferred multi-employer pension contributions would be amended to extend the maturity until March 31, 2015, defer any accrued interest and fees until maturity, provide for contract-rate cash interest payments and eliminate mandatory amortization payments.

As noted, the closing of the exchange offer was conditioned on exchange of 100% of the credit agreement claims and the purchase and sale of the series B notes to holders of $100 million in credit agreement claims.

New securities

According to the previous S-1 filing with the SEC, the company was to register $140 million of the series A notes, $61.92 million of 10% series A paid-in-kind notes, $100 million of series B notes, $44.23 million of 10% series B paid-in-kind notes, 5 million shares of series B preferred stock with an initial liquidation preference of $221.9 million and 5.98 million shares of common stock.

Upon closing of a charter amendment merger, each share of preferred stock will automatically convert into shares of common stock, at a rate equal to about 372.4722 shares of common stock per $44.38 of liquidation preference of the new preferred stock.

Beginning on the dividend accrual date and ending on the date on which YRC completes the charter amendment merger, the preferred stock will accrue cumulative dividends on its liquidation preference at an annual rate of 20%.

The series A notes will not be convertible into common stock until after the charter amendment merger is complete and the second anniversary of the issue date of the series A notes.

After that, noteholders can convert the outstanding notes into shares of common stock at the initial conversion price per share of $0.1134, representing a conversion rate of 8,822 shares of common stock per $1,000 principal amount of series A notes.

Meanwhile, the series B notes will be convertible into shares of common stock after the charter amendment merger is completed at the initial conversion price per share of $0.0618, representing a conversion rate of 16,187 shares of common stock per $1,000 principal amount of series B notes.

Upon conversion, holders of series B notes will not receive any cash payment representing accrued and unpaid interest, however, such holders will receive a make whole premium paid in shares of common stock for the series B notes that were converted.

YRC is an Overland Park, Kan.-based transportation service provider.

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