UPDATE 1-YRC to pay off notes early, cites market unrest
(Adds detail, background, Con-way announcement, stock action)
CHICAGO, Oct 3 (Reuters) - No. 1 U.S. trucking company YRC Worldwide Inc (YRCW.O) said on Friday that it was redeeming $225 million in senior notes early, citing credit market turmoil.
"Given the unrest in the credit markets, we believe it is in the best interest of YRC to satisfy these maturities early," Chief Executive Bill Zollars said in a statement. "Our current financial condition is solid; and with no further maturities until 2010, we are well positioned to weather this economic environment."
Overland Park, Kansas-based YRC said that it would redeem the 8.25 percent notes, which are due Dec 1, on Nov 3. To pay off the notes the company drew down $325 million on its senior revolving credit facility, which matures Aug 17, 2012.
YRC said that as both drawing down the loan and redeeming the notes would take place in fourth quarter, this should not affect its aggregate outstanding debt.
Like other U.S. trucking companies, YRC has been hurt by falling freight volumes and fierce pricing competition because of the housing sector meltdown, weak retail and auto sales, plus the overall weakening of the U.S. economy.
Just this week trucking and logistics company Con-way Inc (CNW.N) slashed its full-year earnings outlook, citing a "battered" economy. That announcement pushed Con-way's shares down more than 20 percent on Thursday and dragged the rest of the trucking stocks with it.
YRC has had a tough year. After struggling for several quarters, the less-than-truckload giant instituted a restructuring program at the beginning of this year that cut 1,100 jobs and shut a number of service centers at two poorly performing regional units. YRC also took a $782 million goodwill write-down in the fourth quarter of 2007 due to the problems at those units.
Less-than-truckload (LTL) operators consolidate smaller loads into a single truck.
In a research note on Thursday on Con-way's earnings outlook reduction, Raymond James analyst William Fisher referred to "YRCW's increasingly precarious financial situation in a nervous credit market."
That, combined with YRC's restructuring and a brutal economic environment, plus "at least one other player's aggressive actions are poised to make LTL market pricing trends more volatile near term," Fisher wrote.
In trade on Nasdaq YRC's shares were down 2 cents at $9.89 Friday morning. The company's shares have fallen more than 60 percent from a 12-month high of $28.83 on Oct 5 2007 and reached a new 12-month low of $9.75 on Thursday.
