Another Leash on Life for YRC Worldwide

A consortium of lenders has given YRC Worldwide, the nation's largest trucking company, two more weeks before a provision that requires the Overland Park, Kan.-based LTL carrier to maintain $100 million in liquidity. The company says it has been given until Oct. 30 before the amendment, the company's 11th such change, takes effect.

  If you ever had doubt that the banks much prefer YRC Worldwide to be alive than dead, this latest saga could convince you.

  YRC has been given a two-week extension on an amendment that would require the nation's largest trucking company to maintain $100 million in liquidity. The amendment is the 11th such amendment for YRC in the past couple of year.

  YRC, which has lost in excess of $2 billion in the last 10 operating quarters, is scheduled to release its third-quarter earnings report on Oct. 30. Presumably, the company will have some good news regarding the liquidity minimums at that time.

  Why are the banks doing this? 

  Simply put, they place the value of YRC as an operating entity greater than it would be if it were to liquidate.

  This makes all the sense in the world. The current used truck market is in a total glut situation. Unloading some 30,000 more pieces of equipment, which is what would occur in a YRC liquidation, would only exacerbate that situation, and cause used truck valuations to plummet even further.

  Besides, the current trucking market is actually improving, albeit slowly. Freight demand is picking up, at least in some geographic areas. Important truck sectors such as housing and autos are coming off the floor, stoking hopes for a decent period of pricing and demand, perhaps starting as soon as 2010.

  "We believe we will have a long-term solution with our lenders in the very near term," YRC Chairman and CEO Bill Zollars says. He added that he is also talking with bondholders, who he says "remain an important part of our plan."

  YRC's continuation as an ongoing entity is a good news for shippers, who currently are enjoying rock-bottom trucking rates as a result of discounting by YRC and major competitors such as UPS Freight, Con-way, Estes Express, Old Dominion Freight Line and others.

   It's also good news for YRC's 30,000 or so workers, mostly Teamsters who already have contributed a 15 percent wage giveback. Even non-union YRC workers are being asked for a pay shave as the company hopes to ride out this period.