The world’s leading transportation service provider, YRC Worldwide (YRCW), received approval from its existing shareholders to issue fresh shares in the market for restructuring its sagging finances.
Earlier, in April 2011, YRC Worldwide entered into a deal with its creditors and labor union Teamsters Brotherhood to reconsider its financial position. The lenders are expected to inject fresh capital in return of equity capital and convertible debts. If this deal succeeds, the lenders will gain a 72.5% equity control and the labor union will get a 25% equity control, leaving a mere 2.5% for the existing shareholders of the company. Thus, under this asset-backed securitization facility, the company will significantly dilute the wealth of the existing shareholders.
Complying with its debt restructuring plans, YRC Worldwide has already divested the majority of YRC Logistics division to a private equity firm, Austin Venturesin August 2010.
Over the last 30 days of trading, YRC Worldwide shares were trading below $1 per share, resulting in a delisting notice from Nasdaq. The company has already received another delisting notice from Nasdaq for issuing shares without the shareholders’ consent.
During the last two and half years, YRC Worldwide has been reeling under the threat of bankruptcy resulting from a significant fall in freight volume coupled with its highly leveraged balance sheet.
Although the U.S. trucking industry is recovering from the slowdown, YRC Worldwide fails to cope with this current recovery. Currently, the company is facing intense competition from Arkansas Best Corp. (ABFS), Con-way Inc. (CNW) and Knight Transportation Inc. (KNX).
We, thus, maintain our long-term Neutral recommendation for YRC Worldwide. Currently,YRC Worldwide has a Zacks#4 Rank, implying a short-term Sell rating.