The U.S. Department of the Treasury announced on July 1 that it intends to make a $700 million loan to YRC Worldwide Inc., and that it had reached an agreement with YRC to receive a 29.6% equity stake in the company.
The loan will mature on Sept. 30, 2024. “To provide proper taxpayer compensation, Treasury will receive shares totaling 29.6% of YRC’s common stock on a fully diluted basis, to be held in a voting trust,” according to the Department of Treasury. “The agreement will also include certain provisions to maintain employment levels and limit executive compensation, dividends and share repurchases.”
According to a less-than-truckload (LTL) industry update from Stifel, the loan will be split into two parts. Roughly $350 million will be used to pay for YRC’s workers' healthcare, which YRC had been delinquent on since February, Stifel noted. The other $350 million will be used to pay for rolling stock, either to buy new tractors and trailers and/or to buy out the leases of existing equipment.
“We are pleased for Treasury to make this loan pursuant to the CARES Act,” said Secretary Steven T. Mnuchin in a statement. “This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers.”
YRC is a provider of critical military transportation and other hauling services to the U.S. government and provides 68% of LTL services to the Department of Defense. According to the Department of Treasury, this loan will enable YRC to maintain approximately 30,000 trucking jobs and continue to support military supply chain operations and the transport of industrial, commercial, and retail goods to more than 200,000 corporate customers across North America.
YRC and its operating companies Holland, New Penn, Reddaway, and YRC Freight have been significantly impacted by the COVID-19 pandemic, the company said in a statement. These companies collectively employ 30,000 trucking professionals, including 24,000 Teamsters.
“We would like to thank Congress for passing the CARES Act and the U.S. Department of the Treasury for providing this vital funding which recognizes the essential role YRCW plays in the nation’s supply chain," said YRC Worldwide CEO Darren Hawkins in a statement. "Through our work with over 200,000 customers, including being a leading transportation provider for the Departments of Defense, Energy, Homeland Security, and Customs and Border Protection, YRCW’s freight professionals have developed a deep understanding of, and expertise in, the importance of a secure and reliable supply chain.
“Our 30,000 employees have continued to serve hundreds of quarantined communities across the country during the pandemic, and this financial assistance will enable us to bridge this pandemic-related crisis and continue to provide essential shipping services for the nation’s supply chain," Hawkins continued. "The funding will also enable us to continue successfully implementing our multi-year strategic plan to transform our five powerful brands to operate as ONE Company, ONE network to better serve our customers and the nation’s supply chain as economic recovery takes hold.”
