YRC receives large amount of cash from U.S. Treasury

Is the U.S Treasury’s investment in YRC Worldwide a win-win?

Earlier this month, the U.S Treasury announced their plan to loan YRC Worldwide $700 million in order to lift the company from red ink. In exchange, the U.S Treasury would receive 30% in equity. The loan will mature in 4 years and should ensure the survival of YRC at least through 2024. In the past, the federal government has been heavily involved in bailing out vital companies and industries from bankruptcy, such as the airline industry. The less-than-truckload (LTL) industry is no different.

According to the U.S. Department of the Treasury, ”To provide proper taxpayer compensation, Treasury will receive shares totaling 29.6% of YRC’s common stock on a fully diluted basis, to be held in a voting trust. The agreement will also include certain provisions to maintain employment levels and limit executive compensation, dividends and share repurchases.”

YRC Worldwide is the parent company of multiple transportation companies such as YRC Freight, Holland, New Penn, and Reddaway. YRC Worldwide plays a vital role in transporting military equipment for various Federal Departments; 68% of their LTL services are allocated to the Department of Defense. The influx of cash from this $700 million loan is designed to stabilize the LTL giant, maintain employment of their 30, 000 employees, and to keep the movement of military equipment flowing throughout the nation. Fortunately, YRC has roughly 200,000 corporate customers across North America apart from their military supply chain operations.

The issues YRC Worldwide have faced in the last two decades have caused concerns from their employees and investors, especially after their purchase of Roadway Express in 2003 for $1.1 Billion. Many would doubt YRC Worldwide’s profitability of rebounding from these financial slumps especially due to the present economic difficulties brought by the COVID-19 Pandemic. However, we must not doubt their ability to save themselves from bankruptcy. In 2009, they made strategic steps to climb out of debt and maintain their company. With the federal government’s help and investment, YRC Worldwide is set to stay afloat and persevere in these trying times.

Sources:

• Schulz, J. (2020, July 08). U.S. Treasury injects YRC Worldwide with $700 million for 30% equity stake. Retrieved July 09, 2020, from https://www.logisticsmgmt.com/article/u.s._treasury_injects_yrc_worldwide_with_700_million_for_30_equity_stake
• U.S. Department of the Treasury. (2020, July 02). Retrieved July 09, 2020, from https://home.treasury.gov/news/press-releases/sm1049
• YRC Gives Government 30% Stake In Latest Bailout. (2020, July 01). Retrieved July 09, 2020, from https://finance.yahoo.com/news/yrc-gives-government-30-stake-154655839.html
• Johnson, M. (2020, July 02). Treasury approves $700 million loan to company being sued for overcharging Pentagon. Retrieved July 09, 2020, from https://thehill.com/homenews/administration/505725-treasury-approves-700-million-loan-to-company-being-sued-for-over