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05 Dec 2008
Moody's downgrades YRC, Probability of Default to Ca
Approximately $540 million of rated debt affected
New York, December 05, 2008 -- Moody's Investors Service today downgraded YRC Worldwide Inc.'s
(YRC) Corporate Family Rating (CFR) to Caa1 from B1, and the Probability
of Default (PD) rating to Ca from B1 following its announcement that it
is commencing tender offers for all of its remaining public debt.
Moody's also downgraded several classes of debt issued by YRC to Ca from
B2. The rating outlook is developing, pending resolution
of the tender offers.
The downgrade of the PD rating reflects YRC's recent announcement
that it is tendering to purchase up to $537 million aggregate principal
amount of senior notes issued by both YRC Worldwide Inc. and its
subsidiary YRC Regional Transportation, Inc. YRC is offering
to purchase these notes at a severe discount to aggregate principal outstanding,
at an average price of approximately $475 per $1,000
principal amount of notes. This is a cash offering, not an
exchange for other securities. Terms and conditions under the notes'
respective indentures will not be affected by this tender offer,
so lenders who remain holding these notes after this offer is completed
will retain the guarantees and covenants as prescribed in their existing
Moody's views the tender, which is being offered at a deep discount
to par, as a distressed exchange. The offering, if
successful, will retire a substantial amount of debt and,
in the case of the convertible notes, cash redemption options that
become payable in 2010. As such, we reflect the likelihood
of the completion of the tender occurring through the assignment of the
Ca Probability of Default rating. Moody's will classify this distressed
exchange as a default and change the PD only to D upon closing of the
tender offers, which represents all of the company's rated
Moody's expects that shortly following a successful execution of
the exchange as proposed, YRC's PD and CFR would likely be
revised to at least Caa1. At that time, YRC would have substantially
utilized its bank credit facility, but would still face the need
to refinance this facility in 2012 as well as the accounts receivables
securitization facility which matures in
..Issuer: USF Corporation
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Ca from B2
..Issuer: YRC Worldwide Inc.
....Probability of Default Rating, Downgraded
to Ca from B1
....Corporate Family Rating, Downgraded
to Caa1 from B1
....Senior Unsecured Conv./Exch.
Bond/Debenture, Downgraded to Ca from B2
..Issuer: USF Corporation
....Outlook, Changed To Developing From
..Issuer: YRC Worldwide Inc.
....Outlook, Changed To Developing From
YRC's ratings were assigned by evaluating factors we believe are
relevant to the credit profile of the issuer, such as i) the business
risk and competitive position of the company versus others within its
industry, ii) the capital structure and financial risk of the company,
iii) the projected performance of the company over the near to intermediate
term, and iv) management's track record and tolerance for
risk. These attributes were compared against other issuers both
within and outside of YRC's core industry and YRC's ratings
are believed to be comparable to those of other issuers of similar credit
The last rating action was on November 12, 2008 when the ratings
were lowered to B1.
YRC Worldwide does business through two national less-than-truckload
(LTL) companies, YRC National Transportation, which comprises
the long-haul operations that comprises the legacy Yellow and Roadway
businesses (about 70% of LTM September 2008 revenue), and
through YRC Regional Transportation , a regional LTL business essentially
comprising YRC's acquired USF companies (about 22% of revenue).
Through its YRC Logistics business unit, the company also offers
logistics and supply chain services. YRC's broad service
offering includes next day and expedited service throughout most of the
Michael J. Mulvaney
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
No Related Data.
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