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Rating Action:

MOODY'S PLACES THE DEBT RATINGS OF YELLOW ROADWAY CORPORATION (SENIOR UNSECURED AT Ba1) AND USF CORPORATION (SENIOR UNSECURED AT Baa1) UNDER REVIEW FOR POSSIBLE DOWNGRADE

28 Feb 2005
MOODY'S PLACES THE DEBT RATINGS OF YELLOW ROADWAY CORPORATION (SENIOR UNSECURED AT Ba1) AND USF CORPORATION (SENIOR UNSECURED AT Baa1) UNDER REVIEW FOR POSSIBLE DOWNGRADE

Approximately $900 million of debt affected

New York, February 28, 2005 -- Moody's Investors Service placed the debt ratings of Yellow Roadway Corporation (Yellow Roadway) and USF Corporation (USF) under review for possible downgrade. Ratings placed under review are as follows:

Yellow Roadway Corporation senior unsecured, issuer and senior implied ratings at Ba1. Roadway LLC, guaranteed by Yellow Roadway Corporation, senior unsecured at Ba1

USF Corporation senior unsecured at Baa1

The review is prompted by the announcement that Yellow Roadway would acquire the stock of USF Corporation for approximately $1.37 billion and assume USF's debt. The transaction is expected to be financed with approximately 50% new stock and 50% cash/debt, and expected to close over the summer following regulatory review and shareholder approval.

Moody's review will focus on the particular challenges of managing the two trucking companies which have traditionally operated in different market segments, in addition to management's plan for near-term debt reduction and the target capital structure over time. The review will also consider the ability to generate incremental cash flow from margin expansion in the near-term under a strong, but not sharply expanding economy, as well as the prospects for the merger synergies proposed by management. The implications of the large representation by the Teamsters union at both companies will also be considered in the review. Moody's will also evaluate the impact of any rationalization of terminals and trucks to meet required returns or to satisfy anti-trust requirements. Moody's will consider the position of the USF Corporation debt in the capital structure of the new company and the type of support for that debt.

The new company will have considerable size and scale as the largest operator in the highly fragmented trucking market, with a particularly broad product offering. Yellow Roadway is the largest national less-than-truckload (LTL) operator, formed through the 2003 merger of Roadway Corporation and Yellow Corporation, and USF is one of the largest regional LTL operators. Pro-forma for fiscal year 2004, the newly combined company would have had revenue of approximately $9.2 billion and EBITDA of $700 million.

Similar to the strategy with Roadway, we expect Yellow Roadway will maintain the USF brand name in the marketplace and to not merge USF's operations. Merger integration risks are limited, therefore, and synergies are expected to come from reducing duplicative back-office costs and improved purchasing power, among other areas. However, USF is a regional LTL trucker and Yellow Roadway spun off its own regional trucking company several years ago, although those operations were considerably smaller in size than USF and were not unionized.

Yellow Roadway is headquartered in Overland Park, Kansas. USF Corporation is headquartered in Chicago, Illinois.

New York
Michael J. Mulvaney
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Jankowitz
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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