YRC Bolstered by $700 Million CARES Act Loan
Jul 8, 2020
LTL shippers could breathe a huge sigh of relief heading into Fourth of July weekend. YRC Worldwide will be getting some much needed capital that they can use for their immediate operations and long-term recovery.
On July 1, the Treasury Department shared an announcement that they’d provide a $700 million federal loan package from coronavirus funds in exchange for a 29.6% stake in the company.
YRC Worldwide, formerly known as Yellow Transportation, is the holding company for Holland, New Penn, Reddaway, and YRC Freight, as well as the logistics company HNRY Logistics.
As noted in the Press Release from the U.S. Department of Treasury, the loan was awarded “based on a certification by the Secretary of Defense that YRC is critical to maintaining national security.” YRC provides about 68% of the military’s LTL shipments and services the Departments of Defense, Energy, Homeland Security, and Customs and Border Protection, in addition to about 200,000 commercial customers.
The loan will be drawn from a provision of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act from late March that authorized $17 billion for companies deemed essential to national security.
Where will the funds go?
Half of the $700 million loan will go towards costs for their 30,000 employees and the other half will be used to upgrade its tractor-trailer fleet (about 7,600 tractors and 30,000 trailers).
In addition to this new loan, YRC holds about $880 million in outstanding debt (as of the end of the first quarter) and a little over $100 million in cash and equivalents.
In the first quarter of 2020, although revenue fell about 2.5% from $1.18 billion in 2019 to $1.15 billion in 2020, its net income was $4.3 million. This was made possible in part by $40 million in property sales.
YRC will have until September 30, 2024 to repay the principal and prove that they can make the changes to continue forward.
Listen to our interview with YRCW CEO Darren Hawkins from March where he talks about how they’ve dealt with COVID-19.