OVERLAND PARK, Kansas U.S. trucking giant YRC Worldwide (YRCW.O) again stretched the deadline on a crucial debt-for-equity swap offer as it and its union workers pushed banks and bondholders to help keep the company afloat, but its stock fell amid speculation about an impending bankruptcy.
YRC said that despite several tries, it was still short of success in its efforts to persuade noteholders of $536.8 million in debt to swap their positions for equity stakes in the U.S. trucking firm.
YRC said it would extend the offer for a sixth time until 11:59 p.m. EST Wednesday.
And the company warned in a filing with the Securities and Exchange Commission that it might need to file for bankruptcy if the exchange offer fails and it cannot address "near term liquidity needs."
"We believe that the substantial debt reduction contemplated by the exchange offers is critical to our continuing viability," the company said. "If we seek bankruptcy relief, we expect that holders of old notes would likely receive little or no consideration for their old notes."
YRC shares ended down 3.88 percent at 99 cents on Wednesday amid the concerns.
Along with the company's efforts to persuade notedholders to swap their debt for equity, the union representing the bulk of YRC workers, the International Brotherhood of Teamsters, have been mounting a public relations campaign to push investors to do the swap.
The teamsters have said hedge funds and banks have been blocking the exchange in pursuit of underlying strategies that would profit from the company's failure, and they are publicly pressuring such firms to instead support the exchange to save YRC jobs.
The company has the needed participation from holders of its 3.375 percent notes and its 5 percent notes. Overall, 84 percent of the company's outstanding notes were tendered by Tuesday night.
Still, only 59 percent of YRC's 8-1/2 percent notes have been tendered, and the company has said at least 70 percent is required to meet certain agreements with a coalition of lenders.
Longbow Research analyst Lee Klaskow said time was of the essence.
"It appears that holdouts of the USF bond exchange are investors that are playing a CDS (credit default swap) trade with the ultimate goal for the company to go into default," Klaskow said.
"The problem is that the longer YRC doesn't get closure on its financing the more skittish its customers become. If enough customers run it is almost like a run on the bank. It will make it very difficult for them," Klaskow said.
Deutsche Bank industry analyst Justin Yagerman said in a note to investors Wednesday that YRC rivals were already benefiting from YRC's struggles, with competitors reporting rising business in the fourth quarter.
"Shippers are growing more concerned with YRC," Yagerman said in the investor note.
Overland Park, Kansas-based YRC is one of the largest U.S. trucking companies but it has been hurt by the economic downturn and by heavy debt tied to a string of acquisitions.
In its SEC filing Wednesday, YRC acknowledged the risk of customer loss and said it may not survive even a bankruptcy reorganization effort.
"We may not be able to obtain the necessary financing to sustain us during the Chapter 11 case," the company said.
Amid the uncertainty, options action in YRC shares was brisk.
"There has been very active put option buying in YRC where the belief is that some investors are purchasing more puts than they normally would to the corresponding amount of stock in fear of the stock going to zero," said Joe Kinahan, chief derivatives strategist at TD Ameritrade
"This allows them to profit on the downside but if problems are solved, it also gives stockholders the opportunity for upside returns over the long term," he said.
(Reporting by Carey Gillam; Additional reporting by Doris Frankel in Chicago; Editing by Dave Zimmerman, Richard Chang and Bernard Orr)